OREANDA-NEWS. June 22, 2010. Target investments in effective production and coal assets enable mmk to demonstrate impressive growth from the beginning of 2010.

MMK sales amounted to USD 1,652 mln in Q1 2010

MMK Group EBITDA amounted to USD 364 mln

MMK profit for the period amounted to USD 94 mln

… AND MAINTAIN HIGH PROFITABILITY LEVEL

EBITDA margin in Q1 2010 equaled to 22%

HIGHLIGHTS OF MMK GROUP CONSOLIDATED INCOME STATEMENT (USD MILLION)

 

Q1 2010

Q1 2009

+/-

Sales of MMK Group

1 652

965

687

EBITDA *

364

99

265

EBITDA margin of MMK Group

22%

10%

-

Profit for period of MMK Group

94

-110

204

* EBITDA calculation is presented in Note 4 to Consolidated Financial Statements for the period ended March 31, 2010

HIGH EFFECIENCY AS RESULT OF DEVELOPMENT STRATEGY

MMK Group sales grew by 71% in Q1 2010 compared to Q1 2009

EBITDA amounted to USD 364 mln. EBITDA growth in Q1 2010 was exceeding the growth of sales to have increased the Q1 2009 level by 3.7 times

The results growth is mainly driven by production volumes increase as well as average price increase due to expanding share of HVA (high value-added) products. Such strategy enables to generate the necessary cash-flow and maintain high profitability level

MMK generated positive profit for the period in Q1 2010 in the amount of USD 94 mln, which is USD 204 mln higher y-o-y 

EBITDA margin amounted to 22% in Q1 2010, which is 2.2 times  higher compared to Q1 2009

Balance sheet highlights

Total assets amounted to USD 15 822 mln as of March 31, 2010. PP&E grew by 6,3% by the end of Q1 2010 and amounted to USD 11 981 mln.

The balance sheet is characterized by high level of stability: equity accounts for 66% of total assets as of end of Q1 2010.

Strong balance sheet ensures stable performance of MMK during recession periods in the steel industry. The debt level of MMK Group is one of the lowest among Russian peers.

The share of short-term debt in the total debt structure kept on decreasing and equaled 36% by the end of Q1 2010 (vs. 39% at the end of 2009 and 75% at the beginning of 2009).

MMK short-term debt amounted in Q1 2010 to USD 866 mln. This amount includes USD 252 mln of revolving credit facilities of traders within MMK Group. Thereby, net short term debt amounted to USD 614 mln.

Cash outflow to investments into property and equipment grew in Q1 2010 to USD 620 mln (from USD 388 mln in Q4 2009). The CAPEX amount grew in particular due to investments of the parent company – commissioning of Continuous Slab Caster #6 and Secondary steel treatment unit, as well as investments of subsidiaries –development of the MMK-Atakas steel-making complex in Turkey and implementation of Belon investment programme.

MMK Operational highlights

 

Q1 2010

Q1 2009

+/-

Finished products output:

2 453

1 917

28%

Slabs and billets

0

0

-

Long products

210

256

-18%

Flat hot-rolled products

1 509

1 260

20%

High value-added products

734

401

83%

Thick plate (Plate mill 5000)

176

0

-

Flat cold-rolled products

251

188

33%

Downstream products

307

213

44%

Finished steel production grew by 28% in Q1 2010 y-o-y. The growth is mainly driven by increasing output of HVA products as the result of commissioning of new facilities for production of highly profitable products to meet the demand coming from the domestic market

HVA goods share went up to 30% in Q1 2010 from 21% in Q1 2009

MMK average realized price grew by 34% in Q1 2010 y-o-y due to demand recovery and increasing share of HVA products

MMK continued to increase the volume of domestic shipments, meeting the growing demand from the key steel consuming sectors. Shipments to Russia and CIS accounted for 64% of overall shipments in Q1 2010

In money terms sales to Russia and CIS accounted for 71% of total steel products sales (vs. 66% in Q1 2009). Pipe manufacturers remained major customers of MMK in the domestic market in Q1 2010 with 38% share of MMK overall shipments to the Russian market.

MMK export revenue originated from different regions of the world. The key export market remained the Middle East (53% of all export shipments in Q1 2010), followed by Europe (22%), North, Central and Latin America (10%), Africa and Asia

HIGHLIGHTS OF BELON OPERATIONS - ММК GROUP COAL SEGMENT (USD MILLION)

MMK consolidates the financial results of Belon starting from Q4 2009

 

Q1 2010

Q4 2009

+/-

Concentrate production:

1 470

987

49%

coking coal concentrate

846

486

74%

steam coal concentrate

624

501

25%

Sales of coal segment

150

94

60%

EBITDA of coal segment

57

8

49

EBITDA margin

38%

9%

 

Profit for the period of coal segment

15

-52

67

Timely acquisition of coal company Belon guarantees increasing volumes of coal concentrate supplies to MMK and contributes significantly to MMK Group financials

Belon production volumes in Q1 2010 amounted to 1.47 mln tonnes of coal concentrate, which is 49% higher compared to Q4 2009. Coking coal consentrate production saw the highest increase - 74% q-o-q

Coal segment sales amounted to USD 150 mln

EBITDA equaled USD 57 mln, ensuring the margin of 38%

Profit for the period amounted to USD 15 mln

STRONG POTENTIAL AND SUCCESFUL CRISIS MANAGEMENT EXPERIENCE GUARANTEE MMK EFFECIENCY UNDER ANY SCENARIOS

Investments in quality and new products types (with prevailed share of HVA-products) enable MMK to maintain high level of domestic shipments to meet invariably high demand of end-consumers

The widest products range among Russian peers provides flexibility to promptly react to conjuncture, in particular thanks to modern facilities to produce both flat and long products

Strong footprint of MMK in export markets and the widest sales geography – more than 60 countries in the world – enable the company to build an optimal export orders book

MMK continues implementing its MMK-Atakas project in its key export market – Middle East

MMK enjoys 100% guaranteed supplies of necessary raw materials. MMK is 30% self-sufficient in iron ore, 50% in coking coal, 100% in scrap and 85% in electricity

Employment of different steel making technologies – converters (using pig iron, i.e. iron ore and coal, mostly) and electric arc furnaces (using scrap mostly) – provides flexibility to control costs depending on price dynamics for different raw materials

Expansion of Belon business will make it possible to increase self-sufficiency in coking coal and enhance the financial performance of MMK group