14th Apr 2020 09:04
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. 14 April 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 results in comparison to Q4 2019 Pig iron output decreased by 9.6% quarter-on-quarter (q-o-q) and amounted to 2,355 thousand tonnes amid the suspension of blast furnace №2 production due to a capital overhaul in February. The overhaul will allow to improve environmental performance through constructing dust exhausting units at casting house 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 work scheduled at blast furnace facilities compared to the previous year. Steel output was down by 2.7% y-o-y due 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 supply at 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 suppliers redirect 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 as the 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 to spot prices declining by $20-25/tonne within the month. Russian coking coal market: the volume of raw materials supply in Russia continue to exceed demand; exports slightly increased in Q1 2020 prior 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 throughout the whole of 2019, however they are remained flat in Q2 as prices in Russia are already close to cash costs levels for many coal companies. Russian metal scrap market: the increase in scrap prices in Russia in early 2020, which occurred amid a period of low scrap collection dynamics, supported the supply volume. However, starting from February 2020, steel companies have been reducing purchasing prices, due to lower exports quotes for scrap. At the end of Q1 2020, prices continued to drop amid potential decline in capacity utilisation of steel companies due to unfavourable macroeconomic conditions.
MMK GROUP: CONSOLIDATED RESULTS (thousand tonnes)
Consolidated prices for metal products (USD / tonne)
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 segment Russia (thousand tonnes)
Sales of finished products in Q1 2020 declined by 5.3% q-o-q and amounted to 2,597 thousand tonnes mainly due to scheduled maintenance work at rolling facilities. Sales declined by 6.6% compared to Q1 2019. In addition to the abovementioned factor, the sales decline was significantly impacted by a 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 zero capital 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 to Q1 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 tied to the more complex production mix amid an 100% capacity utilisation rate. The volume of sales of tin plate in Q1 2020 increased by 39.1% q-o-q and amounted to 42 thousand tonnes due 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 seasonal demand 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 to 109 thousand tonnes due to higher sales margins for galvanised rolled steel. Polymer-coated steel sales declined by 6.8% compared to Q1 2019. Steel segment Turkey (thousand tonnes)
Sales of finished products in Q1 2020 grew by 5.1% q-o-q and totalled 167 thousand tonnes due to the expansion 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 the early 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)
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. The decline compared to Q1 2019 amounted 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 demand for 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 costs for a 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 management to 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. ММК 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 -0.13х 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%.
Investor contacts Veronika Kryachko tel.: +7 (3519) 25-75-01 E-mail: [email protected]
Media contacts
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| ISIN: | US5591892048 |
| Category Code: | TST |
| TIDM: | MMK |
| LEI Code: | 253400XSJ4C01YMCXG44 |
| Sequence No.: | 58044 |
| EQS News ID: | 1020921 |
| End of Announcement | EQS News Service |
UK Regulatory announcement transmitted by DGAP - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement.
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