MMK.L Regulatory News (MMK)

MMK cut costs by USD 135 mln in 2015

25-02-2016, Magnitogorsk

OJSC Magnitogorsk Iron and Steel Works ("MMK" or "the Company") (LSE: MMK) cut production costs by USD 135 million in 2015 by implementing programmes to improve operational efficiency. As a result of the initiatives, MMK reduced the cost of sales of its finished products by nearly 3%.

In 2015, MMK Group focused on improving energy efficiency and fostering innovation. By implementing energy efficiency measures and adopting low-cost, high-efficiency investment projects, the company cut spending on fuel and energy resources by USD 30 million.

Efficient maintenance of technological processes helped to reduce consumption of raw materials by USD 50 million in 2015. Administrative and technical measures to lower equipment repair and maintenance costs led to savings of USD 19 million, and another USD 36 million was saved by optimising management costs.

Cost-cutting programmes for 2016 have been developed and implemented as part of on-going improvements at all MMK Group units.

MMK CEO Pavel Shilyaev said:

"Successful implementation of optimisation programmes requires further development of energy-savings initiatives. Our plans include the introduction of automated systems to optimise the composition of coal charge, iron ore, and steelmaking formulas. This will help us optimise procurement of raw materials and ferroalloys. We aim to reach a goal of cutting costs by 2%-3% per year. This will make it possible to strengthen MMK's competitive edge on the metals market. We will continue to equip our production units with instrumentation and weight measuring systems.

"A key task for us is to engage all of our employees into optimisation of raw materials use via further innovations and monitoring of production resources consumption at the level of departments and production teams."

Notes for editors:

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 complex 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 2015, the company produced 12.2 million tonnes of crude steel and 11.2 million tonnes of commercial steel products. MMK Group had sales in 2015 of USD 5,839 million and EBITDA of USD 1,668 million.

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