6 Apr 2010 07:00
April 05, 2010
OJSC "Magnitogorsk Iron and Steel Works" (OJSC "MMK")
consolidated financial statements according to IAS for the year ended December 31, 2009
MMK demonstrates impressive growth in 2009 …
o MMK sales amounted to USD 5,081 mln in 2009
o MMK profit for the period amounted to USD 219 mln in 2009
… and best margins recovery through the crisis period
o EBITDA margin in 2009 reaches 25.3% (vs. 21% in 2008)
Q4 2009 results - high effeciency as result of development strategy
Ø The results meet the management guidance and exceed optimistic expectations
Ø MMK Group sales grew 19% q-o-q in Q4 2009
Ø EBITDA growth significantly exceeded sales growth and amounted to 115%
Ø MMK continued generating positive profit for the period - on the background of break-even 9 months of 2009 profit for the period amounted to USD 219 mln in Q4 2009
Ø Targeted investments enabled MMK to boost efficiency during the reported period and will provide support going forward
highlights of MMK group consolidated income statement (usd million)
|
| Q4 2009 | Q3 2009 | +/- |
| Sales of MMK Group | 1 674 | 1 404 | 19% |
| EBITDA * | 670 | 309 | 115% |
| EBITDA margin of MMK Group | 40.0% | 22.0% | - |
| Profit for period of MMK Group | 219 | 76 | 193% |
* EBITDA calculation is presented in Note 7 to Consolidated Financial Statements for the year ended December 31, 2009
Ø MMK Group sales grew by 19% in Q4 2009 and amounted to USD 1, 674 mln. This figure was affected by export sales growth of steel traders within MMK Group, as well as consolidation of Belon's sales for Q4 2009
MMK investments projects focused on asset base upgrade and development of HVA products in demand enable the Group to generate the necessary cash-flow and maintain high profitability through steel and raw materials cycle.
Ø EBITDA amounted to USD 670 mln, which is USD 351 mln higher q-o-q
Ø EBITDA margin in Q4 2009 grew by 18% and amounted to 40.0%
Ø Thoughtful approach to acquisitions yields good results - revaluation of investment into 50% of Onarbay Enterprises Ltd (holding company, controlling 82.6% of Belon) - to bring the stake to the market price on the date of gaining control over the asset - positively affected EBITDA of MMK Group
Ø MMK Group generated positive profit for the period in Q4 2009 in the amount of USD 219 mln
MMK group parent company highlights (usd million)
|
| Q4 2009 | Q3 2009 | +/- |
| Sales of MMK | 1 335 | 1 323 | 1% |
| EBITDA | 617 | 374 | 39% |
| EBITDA margin of MMK | 46.2% | 28.3% | - |
| Profit for the period of MMK | 304 | 152 | 50% |
Ø Sales of the parent company (OJSC MMK) stayed almost unchanged to gain 1% to USD 1,335 mln
Ø At the same time EBITDA grew by 39% to amount to USD 617 mln
Ø EBITDA margin reached record 46.2%
Ø Profit for the period doubled and equaled USD 304 mln in Q4 2009
Ø In the course of 2009 MMK increased production of highly profitable product types - galvanized and colour-coated steel - by 8% and 32% accordingly y-o-y owing to new facilities commissioning
Ø MMK gained 17% Russian rolled steel market share to retain leadership. The bulk of MMK production - above 4.9 tons in 2009 - was shipped to the domestic market (Russian and CIS) which accounts for 56% of the overall shipments
Shipments to the markets of Russia and CIS in money terms accounted for 64% of total sales. Pipe manufacturers remain major customers of MMK in the domestic market with 37% share of MMK domestic shipments in 2009.
MMK export originate from different regions of the world, including MMK key export market - Middle East, as well as Europe, Asia, North, Central and Latin America, Africa and Australia.
Profitability and cash-flow statement highlights
Due to higher revenue growth vs. operational costs, MMK Group increased the amount of operating profit to USD 234 mln in Q4 2009 from USD 82 mln in Q3 2009 to reach 14% operational margin.
Cash outflow to investments into property, plant & equipment increased by 31% in Q4 2009 to USD 388 mln from USD 296 mln in Q3 2009, particularly due to construction finalization of Continuous slab caster #6 and Secondary steel treatment unit.
MMK growth by means of acquisitions was carried out with borrowed funds, while the CAPEX programme was funded mostly with generated cash-flow and if necessary with cash on the balance.
Balance sheet highlights
MMK maintains one of the strongest balances in the sector. Debt amount is the least among the Russian steel companies. The balance sheet is characterized by high level of stability: equity accounts for 67% of total assets at the end of 2009.
PP&E grew by 16% by the end of 2009 to amount to USD 11 276 mln mostly owing to acquisition of Belon and commissioning of production facilities.
The efficient working capital management policy made it possible to gain leadership in inventories turnover and to balance accounts receivable and payable as much as possible (the balance of accounts receivable and payable stands at USD 13 mln only).
Total debt at the end of 2009 stood at USD 2,118 mln. MMK management was successful in bringing down the short-term debt and in lowering the cost of debt in 2009.
The average interest rate for MMK group debt was brought down from 7.87% at the beginning of 2009 to 5.74% at December 12, 2009.
MMK short-term debt remained mostly unchanged in Q4 2009 at USD 828 mln. In the whole, MMK short-term debt was reduced by 36% in 2009 through redemption of expensive and short-term loans. In addition, USD 285 mln of short term debt is represented by revolving credit facilities of traders within MMK Group. Thereby, net short term debt amounted to USD 543 mln.
The share of short-term debt in the total debt structure kept on decreasing and equaled 39% by the end of 2009 (vs. 53% at the end of Q3 2009 and 75% at the beginning of 2009).
Total debt/EBITDA ratio at the end of 2009 stands at 1.65x.
MMK policy to pursue balanced organic growth strategy in 2009 proved to be efficient - the company did not have to rely upon additional liquidity sources (such as proceeds from disposal of assets) or make use of long-term investments.
2009 results - solid platform for further sustainable growth
Ø 2010 production is expected to exceed 2009 level by 30%.
Ø Optimal sales geography and shift in product portfolio to further increase the share of high value added products present flexibility to react to conjuncture
Ø MMK continues implementing its MMK-Atakas project in its key export market - Middle East.
Ø High level of self-sufficiency in raw materials and energy provide stability at raw materials prices growth: MMK is 30% self-sufficient in iron ore, 50% in coking coal, 100% in scrap and 85% in electricity.
Ø Expansion of Belon business will make it possible to increase self-sufficiency in coking coal and enhance financial performance.
Ø Completion of Mill 5000 complex (including slab-caster #6 and secondary steel treatment unit) allows to develop production of plate of high-strength steel grades (up to x120) and bring the mill to full capacity.
* * *
Financial statement under IAS is to be found at: http://www.mmk.ru/rus/shareholders/b_reports/r_reports/index.wbp
The presentation is to be found at: http://www.mmk.ru/rus/shareholders/presentations/index.wbp
The Magnitogorsk Iron and Steel Works OJSC (MMK) is among the world's largest steel producers and is one of the leaders of Russia's steel industry. The company's operations in Russia include a large steel producing complex encompassing the entire production chain, from preparation of iron ore to downstream processing of rolled steel. MMK turns out a broad range of steel products with a predominant share of higher value added goods. In 2009 the Company produced 9.6 mln tons of crude steel and 8.3 mln tons of commercial products. MMK Group sales in 2009 stood at USD 5.081 bln.