PJSC Magnitogorsk Iron and Steel Works (MMK) PJSC Magnitogorsk Iron and Steel Works: MMK Group financial results for Q4 and 12M 2020 02-Feb-2021 / 07:56 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 PJSC Magnitogorsk Iron & Steel Works ("MMK", or the "Group") (MICEX-RTS: MAGN; LSE: MMK), RESULTS for q4 and 12M one of the world's largest steel producers, is pleased to announce its financial results for 2020 Q4 and 12M 2020. 2 february 2021 Magnitogorsk, Russia
MMK GROUP FINANCIAL RESULTS
Q4 2020
USD mln Q4 2020 Q3 2020 % 12M 2020 12M 2019 % Revenue 1,852 1,565 18.3% 6,395 7,566 - 15.5% EBITDA 474 350 35.4% 1,492 1,797 - 17.0% EBITDA margin, % 25.6% 22.4% 3.2 p.p. 23.3% 23.8% - 0.5 p.p. Profit for the period 313 102 206.9% 604 856 - 29.4% Free cash flow1 125 335 - 62.9% 557 883 - 36.9% Net debt - 88 - 34 - - 88 - 235 - Net debt/EBITDA - 0.06x - 0.03x - - 0.06x - 0.13x - Net working capital 745 672 10.9% 745 953 - 21.8% L3M Net working capital/revenue 10.1% 10.7% - 0.6 p.p. 10.1% 13.8% - 3.7 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 18.3% quarter-on-quarter (q-o-q) to USD 1,852 mln, which reflects a growth in sales volumes and a rise in steel prices in Russia and globally. KEY FINANCIAL ? EBITDA for Q4 2020 grew to USD 474 mln, up 35.4% q-o-q, driven by higher margins resulting from INDICATORS stronger sales and steel prices trending upwards in key sales markets. EBITDA margin increased by 3.2 p.p. to 25.6%. FOR Q4 2020 VS Q3 2020 ? Net profit more than tripled q-o-q to USD 313 mln, mainly due to higher margins and foreign exchange gains. ? FCF for the quarter amounted to USD 125 mln, down 62.9% q-o-q, due to higher CAPEX and the seasonal build-up of raw materials amid growing purchase prices. ? MMK Group's revenue declined by 15.5% year-on-year (y-o-y) to USD 6,395 mln due to worsening market conditions and the scheduled reconstruction of Hot-Rolling Mill 2500. KEY FINANCIAL ? EBITDA decreased by 17.0% y-o-y to USD 1,492 mln due to the impact of the pandemic on business INDICATORS activity and global steel prices. EBITDA margin was down by 0.5 p.p. to 23.3%. FOR 12M 2020 VS 12M 2019 ? Net profit declined by 29.4% y-o-y to USD 604 mln, mainly due to worsening market conditions amid the global pandemic. ? FCF amounted to USD 557 mln, down 36.9% y-o-y, reflecting the worsening global macroeconomic environment.
COMMENT BY MMK'S CEO
Dear shareholders and colleagues, CEO In 2020, the Russian and global economies were hit by the one-two punch of the COVID-19 pandemic and PAVEL « falling oil prices, with the biggest blow to the Russian economy coming in the second quarter. SHILYAEV Nevertheless, as early as in June, when lockdown restrictions were partially lifted and support measures were increased, the trends in GDP and real household income started to reverse. Despite the new wave of the pandemic in the second half of the year, the Russian economy embarked on a path to recovery, which had a positive impact on our fourth quarter performance. The launch of a large-scale vaccination programme throughout the country in Q1 2021 has provided the necessary impetus to further stabilise the epidemiological situation. The COVID-19 response centre that I am heading up continues to operate across MMK. Protecting the health of the Group's workers and employees while ensuring the continuity of all business processes remains our top priority. In the fourth quarter, the traditional impact of seasonal factors on demand for metal products in the Russian market was almost completely offset by predominantly milder weather, as well as the continuing tailwind from the pent-up demand built up during the second quarter. While in November and December our stocks of premium products traditionally increase, ready to be sold typically at the beginning of the following year, the reporting quarter saw a trend reversal due to the continuing recovery in demand from the automotive industry and a strong pipeline of orders from the construction industry. Sales volumes and sales mix in the fourth quarter were also given a serious boost after Hot-Rolling Mill 2500 ramped up to its design capacity. As a result, domestic sales in the fourth quarter (Russia and CIS) amounted to 76%, while the share of premium products in total sales was 44%. In absolute terms, our sales of premium products stayed flat quarter-on-quarter, aligned with our strategic priorities. In the fourth quarter, we continued realization of the project on a new coke-oven battery construction. In accordance with the project schedule, a number of winter-specific preparatory operations were completed during the quarter. We expect total CAPEX to reach about USD 1 bn in 2021, with the construction period for some parts of the facility postponing from 2020. Financial stability remains a key focus for the Company. MMK's debt leverage remains among the industry's lowest at -0.06x Net Debt/EBITDA as of the end of the fourth quarter. The Group's high level of available liquidity (USD 2.6 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 Q4 2020 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 0.945 per ordinary share (114% of FCF) for Q4 2020, in line with the Company's strategic commitment to maximise TSR. »
MMK GROUP'S PERFORMANCE
ACROSS CORE SEGMENTS
STEEL SEGMENT RUSSIA
USD mln Q4 2020 Q3 2020 % 12M 2020 12M 2019 % Revenue 1,734 1,456 19.1% 5,972 7,226 - 17.4% EBITDA 447 336 33.0% 1,440 1,744 - 17.4% EBITDA margin, % 25.8% 23.1% 2.7 p.p. 24.1% 24.1% 0.0 p.p. Cash cost of slab, USD/t 285 263 8.4% 269 305 - 11.8% + 19.1% Q-o-Q REVENUE The Russian steel segment's revenue for Q4 2020 totalled USD 1,734 mln, up 19.1% q-o-q driven by sales growth due to strong global demand for steel amid a more favourable pricing environment in key sales markets. The y-o-y decline in revenue by 17.4% to USD 5,972 mln was driven by a significant downturn in market conditions as a result of the pandemic's spread in Russia and globally. The segment's EBITDA for Q4 2020 amounted to USD 447 mln, up 33.0% q-o-q, as a result of growing sales and sales margins. EBITDA declined by 17.4% y-o-y to USD 1,440 mln, reflecting the pandemic's negative + 33.0% Q-o-Q impact on business activity and global steel prices. EBITDA The Group's Q4 2020 profitability saw a positive boost to the sum of USD 23 mln for the quarter from the operational efficiency and cost optimisation programmes under our updated strategic initiatives. The annual effect of the programmes amounted to USD 83 mln. The slab cash cost in Q4 2020 amounted to USD 285 per tonne, up 8.4% q-o-q, driven mainly by growing iron ore and scrap prices and the higher share of pellets and scrap in the steelmaking charge. The slab cash + 8.4% Q-o-Q cost declined 11.8% y-o-y to USD 269 per tonne, primarily reflecting the impact of the rouble depreciation and decline in prices for coal concentrate. SLAB CASH COST
STEEL SEGMENT TURKEY
USD mln Q4 2020 Q3 2020 % 12M 2020 12M 2019 % Revenue 165 137 20.4% 518 520 - 0.4% EBITDA 21 11 90.9% 34 - 12 - EBITDA margin, % 12.7% 8.0% 4.7 p.p. 6.6% - 2.3% 8.9 p.p. + 20.4% Q-o-Q REVENUE The Turkish steel segment's revenue for Q4 2020 increased by 20.4% q-o-q to USD 165 mln, reflecting stronger demand from Turkish and European consumers amid a rise in global steel prices. Revenue for 12M 2020 totalled USD 518 mln, slightly down y-o-y. The favourable environment in the market and the growing exports of galvanised steel almost doubled the segment's EBITDA to USD 21 mln in Q4 2020. Year-on-year, the Turkish steel segment's EBITDA grew to USD 34 mln due to sales growth as the strategy to diversify and boost sales margins was successfully implemented.
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