OREANDA-NEWS. July 31, 2012. MMK (LSE: MMK) announces its operational results for Q2 and H1 2012.

MMK Group operational highlights

Production, thousand tonnes

Products

Q2 '12

Q1 '12

%

H1 '12

H2 '11

%

MMK Group crude steel

3,294

3,417

-4%

6,711

5,905

14%

MMK crude steel

3,012

3,117

-3%

6,129

5,884

4%

MMK Metalurji crude steel

282

300

-6%

582

21

x28

MMK Group steel products

3,062

3,021

1.4%

6,082

5,349

14%

MMK steel products

2,776

2,766

0.4%

5,542

5,234

6%

MMK-Metiz steel products

142

110

29%

251

237

6%

MMK Metalurji steel products

284

253

12%

538

112

x5

MMK Group HVA products

1,209

1,199

1%

2,392

2,050

17%

MMK Group HVA products share

39%

40%

 

39%

38%

 

Belon coal concentrate

761

776

-2%

1,537

1,486

3%

Iron ore

1,107

1,047

6%

2,155

2,423

-11%

         MMK    Group   crude steel output in H1 2012 amounted to 6,711 thousand tonnes (14% higher y-o-y)

         MMK    Group   finished steel products output in H1 2012 amounted to 6,082 thousand tonnes (14% higher y-o-y).

       MMK    Group   finished steel products output in Q2 2012 totalled 3,062 thousand tonnes (1.4% higher q-on-q)

         MMK    finished steel products output in Q2 2012 totalled 2,776 thousand tonnes (0.4% higher q-on-q)

         MMK-Metiz finished steel products output in Q2 2012 totalled 142 thousand tonnes (29% higher q-on-q)

        MMK-Metalurji finished steel products output in Q2 2012 totalled 284 thousand tonnes (12% higher q-on-q)

        MMK Group High-Value-Added (HVA) steel products in H1 2012 increased 17% y-o-y and reached 2,392

thousand tonnes. HVA production in Q2 2012 amounted to 1,209 thousand tonnes.ЃЎ          Coking coal concentrate output in H1 2012 amounted to 1,537 thousand tonnes (3% higher y-o-y).       

       In Q2 2012 coking coal concentrate output totalled 761 thousand tonnes.        Consumption of in-house iron ore in Q2 2012 amounted to 1,107 thousand tonnes (6% higher q-o-q).

Steel segment MMK

Production, thousand tonnes

Products

Q2 '12

Q1 '12

%

H1 '12

H2 '11

%

Cast iron

2,557

2,479

3%

5,037

4,780

5%

Crude steel

3,012

3,117

-3%

6,129

5,884

4%

Finished products output, incl.:

2,776

2 766

0.4%

5,542

5,234

6%

Slabs and billets

0.7

45

-99%

46

55

-17%

Long products

451

401

12%

852

648

31%

Flat hot-rolled products

1,416

1,380

3%

2,797

2,818

-1%

High value-added (HVA) products, incl.:

908

939

-3%

1,847

1,713

8%

Thick plate (mill 5000)

195

248

-22%

444

550

-19%

Flat cold-rolled products

304

316

-4%

621

481

29%

Downstream products, incl.:

409

374

9%

783

682

15%

Tin plate

33

37

-12%

70

77

-8%

Galvanized steel

144

159

-9%

303

264

15%

Colour-coated steel

94

65

44%

158

124

28%

Band

37

30

25%

67

49

37%

Formed section

77

60

28%

137

142

-3%

Pipes

24

23

3%

47

26

78%

Shipments by market:

 

 

 

 

 

 

Domestic market*

2,162

2,033

6%

4,195

3,565

18%

Export

614

732

-16%

1,347

1,669

-19%

Average prices, U

SD

 

Q2 '12

Q1 '12

%

H1 '12

H2 '11

%

Average price per tonne:

 

 

 

 

 

 

Slabs and billets

-

496

-

502

555

-10%

Long products

626

647

-3%

636

697

-9%

Flat hot-rolled products

590

599

-1%

595

675

-12%

High value-added (HVA) products, incl.:

896

894

0.2%

895

1,007

-11%

Thick plate (mill 5000)

916

939

-2%

927

1,144

-19%

Flat cold-rolled products

712

726

-2%

719

789

-9%

Downstream products, incl.:

1,023

1,007

2%

1,016

1,051

-3%

Tin plate

1,120

1,093

2%

1,105

1,140

-3%

Galvanized steel

1,018

984

3%

999

993

1%

Colour-coated steel

1,253

1,225

2%

1,245

1,236

1%

Band

790

867

-9%

825

1,045

-21%

Formed section

905

949

-5%

925

976

-5%

Pipes

764

752

2%

758

859

-12%

Average price per tonne, incl.:

696

705

-1%

700

785

-11%

Domestic sales*

744

772

-4%

758

869

-13%

Export sales

528

517

2%

521

608

-14%

* includes CIS sales

      Finished steel products output in Q2 2012 amounted to 2,776 thousand tonnes, which is nearly identical to the output in Q1 2012. Sales to the high-priority domestic market increased by 6% in volume, with the total share in shipments rising 4 percentage points in the second quarter to 78%.

      In H1 2012 production of high-value-added (HVA) products increased by 15% from H1 2011. This growth was driven by an increase in output of cold-roll, galvanized and colour-coated steel products.

          The 3% decrease in HVA sales from Q2 2012 compared to       Q1 2012 was largely a result of lower sales of thick plate (mill 5000). Over the same period the production   of downstream products rose by 9% q-o-q and totalled 409 thousand tonnes.

         In Q2 2012 there were no sales of slabs to third parties.

          The 12% rise in shipments of long steel products in Q2 2012     compared to Q1 2012 resulted from an increase in demand from the construction sector. In addition to this factor, growth in long product sales was also generated by an increase in production volumes at the Metiz division of MMK Group - MMK-Metiz (up 29%), which processes long steel products produced by MMK.

          Production of hot-roll products in Q2 2012 amounted to 1,416 thousand tonnes, which is 3% more than in Q1 2012.

          The volume of finished products from Mill 5000 in Q2 2012 decreased by 22% compared to Q1 2012 and amounted to 195 thousand tonnes. The lower volume of shipments of Mill 5000 flat hot-roll products was a result of completion in Q2 2012 of large shipments for construction of current pipeline projects and the situation with regard to prospective projects did not improve (postponement of new projects).

          The reduction of galvanized steel production in Q2 2012 in comparison to Q1 2012 by 9% was related to the substantial growth in shipments of colour-coated steel.

          The increase in the volume of shipments of colour-coated steel products in Q2 2012 by 44% in comparison to Q1 2012 can be explained by the seasonal increase in the construction sector in Russia.

         The average price for steel products sold in Q2 2012 decreased insubstantially (by approximately 1%) in comparison with Q1 2012.

MMK-Metiz

Production, thousand tonnes

Product

Q2 '12

Q1 '12

%

H1 '12

H2 '11

%

Finished steel products, incl.:

142

110

29%

251

237

6%

Products from MMK steel

140

108

29%

248

234

6%

          Production of finished steel products at MMK-Metiz in Q2 2012 grew by 29% in comparison to Q1 2012 and amounted to 142 thousand tonnes.

          This growth is related to the seasonal surge in the sectors which are the main consumers of MMK-MetizЃfs products (the construction industry and metallurgy).

MMK Metalurji

Production, thousand tonnes

Product

Q2 '12

Q1 '12

%

H1 '12

H2 '11

%

Crude steel

282

300

-6%

582

21

x28

Finished products of MMK Metalurji, incl.:

284

253

12%

538

112

x5

Flat cold-roll products

125

119

5%

244

12

x20

HVA products, incl.:

159

135

18%

294

100

x3

Galvanized steel

81

76

6%

157

61

x3

Colour-coated steel

79

58

35%

137

39

x4

          Steel smelting in Q2 2012 totalled 282 thousand tonnes, which is 6% less than in Q1 2012.

          The sale of finished products from MMKЃfs operations in Turkey in Q2 2012 amounted to 284 thousand tonnes, which is up 12% from Q1 2012. The higher level of finished products sold than crude steel produced is a result of the processing of hot-roll products supplied by MMK GroupЃfs operations in Russia.

          Colour-coated steel production increased by 35% from Q1 2012 to Q2 2012 as a result of the seasonal resurgence of the construction sector.

          Growth in galvanized steel production reached 6% in Q2 2012 q-o-q, also due to seasonal growth factors.

Mining segment

Production, thousand tonnes

Product

Q2 '12

Q1 '12

%

H1 '12

H2 '11

%

Coking coal

1,226

1,292

-5%

2,518

2,372

6%

Mined

753

998

-25%

1,751

1,844

-5%

Purchased

473

294

61%

767

528

45%

Coking coal concentrate

761

776

-2%

1,537

1,486

3%

          The lower volume of coking coal mined by MMK (down 25%) in Q2 2012 in comparison to Q1 2012 was related to the continuation of the scheduled mine maintenance in April-May 2012. This work was concluded at the end of Q2 2012.

          Production of coking coal concentrate in Q2 2012 amounted to 761 thousand tonnes. This decrease in production by 2% in comparison to Q1 2012 was a result of the lower volume of MMK-mined coal in Q2 2012.          Despite the relatively insignificant decline in the volume of coal concentrate produced, shipments of concentrate to MMK in Q2 2012 increased by approximately 12% q-o-q.

          On the whole in 2012, despite the scheduled maintenance work, production of coking coal concentrate should remain at the same level seen in 2011. Ore

Production, thousand tonnes

Product

Q2 '12

Q1 '12

%

H1 '12

H2 '11

%

Iron ore (consumed at MMK), incl.:

1,107

1,047

6%

2,155

2,423

-11%

MMK iron ore base at Bakal*

139

125

11%

264

578

-54%

MMK iron ore base in Magnitogorsk

458

467

-2%

925

770

20%

Slag processing

511

455

12%

966

1,075

-10%

*- from the end of Q2 2011 shipments from Sosnovsky iron ore field are included in shipments from MMK iron ore base in Magnitogorsk          Captive iron ore consumption in Q2 2012 increased 6% q-o-q and amounted to 1,107 thousand tonnes.          Consumption of iron ore coming from Bakal in Q2 2012 amounted to 139 thousand tonnes, which is an 11% increase from Q1 2012.

          Consumption of iron ore from Magnitogorsk in Q2 2012 totalled 458 thousand tonnes, which was 2% less

than in Q1 2012. This decrease was a result of a           planned reduction in the production of high-grade ore.          Output from slag processing rose 12% q-o-q in            Q2 2012 and amounted to 511 thousand tonnes. The     10% decrease in the use of iron from clag processing in H1 2011 to H1 2012 was related to a number of improvements made aimed at reducing waste of primary resources and improvement of the quality of the sinter.

Key investment projects of MMK Group Mill 2000

On 16 July 2012, MMK launched the second stage of its new cold rolling complex, which includes a continuous hot-galvanizing unit, a combined annealing/hot-galvanizing unit, and a coil inspection and slitting line. Russian President Vladimir Putin attended the ribbon-cutting ceremony. With the launch of the second stage the construction process of the most modern cold rolling complex in Russia was completed.

At present the mill is beginning to prepare test  products made of highly durable cold-rolled and galvanized steel for testing by automakers, who will be certifying the          mill for the manufacturing of automotive components.

Since early 2012 the Mill 2000 has been working at a production level of approximately 100 thousand tonnes of cold-rolled products per month. These cold-rolled products are now being used for the production of galvanized steel and colour-coated steel at MMKЃfs plants. The high quality of these products improves their competitiveness on the market.

Outlook

It is expected that in Q3 2012 the volume of sold finished products will remain at approximately the same level as in Q2 2012.

Steel consumption growth in Russia and in the world in general, production volumes growth at MMK assets in Turkey allow for higher sales volumes of MMK Group steel products for 2012 compared to 2011.

The publication of consolidated results under IFRS for MMK Group for Q2 and H1 2012 is scheduled for late August 2012.