PJSC Magnitogorsk Iron and Steel Works (MMK) PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q2 and H1 2019 16-Jul-2019 / 09:59 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
   MMK Group Trading Update for Q2 and H1 2019 ММК Group: Consolidated results (thousand tonnes) |  | Q2 2019 | Q1 2019 | % | H1 2019 | H1 2018 | % | | Finished products sales, of which: | 2,856 | 2,782 | 2.7% | 5,638 | 5,675 | -0.7% | | Long products | 366 | 333 | 9.9% | 700 | 648 | 8.0% | | Flat hot-rolled products | 1,064 | 1,111 | -4.2% | 2,175 | 2,302 | -5.5% | | Thick plate (mill 5000) | 281 | 293 | -4.1% | 574 | 387 | 48.3% | | Flat cold-rolled products | 241 | 257 | -6.2% | 498 | 615 | -19.0% | | Downstream products, of which: | 904 | 788 | 14.7% | 1,692 | 1,723 | -1.8% | | Tin plate | 43 | 32 | 34.4% | 75 | 73 | 2.7% | | Galvanised steel | 484 | 414 | 16.9% | 898 | 880 | 2.0% | | Polymer-coated steel | 176 | 156 | 12.8% | 332 | 355 | -6.5% | | Band | 29 | 30 | -3.3% | 59 | 73 | -19.2% | | Formed section | 38 | 41 | -7.3% | 79 | 75 | 5.3% | | Pipes | 11 | 11 | - | 22 | 30 | -26.6% | | Metalware | 106 | 93 | 14.0% | 199 | 203 | -2.0% | | Other metal products | 16 | 11 | 45.4% | 27 | 34 | -20.6% | | HVA products | 1,426 | 1,338 | 6.6% | 2,764 | 2,726 | 1.4% | | Share of HVA products | 49.9% | 48.1% |  | 49.0% | 48.0% |  | | Coal concentrate production | 487 | 777 | -37.3% | 1,263 | 1,412 | -10.5% | | Iron ore production | 729 | 716 | 1.8% | 1,202 | 1,320 | -8.9% |
Q2 2019 highlights vs. Q1 2019 MMK Group's total sales of finished products in Q2 2019 totalled 2,856 thousand tonnes, up 2.7% quarter-on-quarter (q-o-q). MMK Group's sales of HVA products in Q2 2019 totalled 1,426 thousand tonnes, up 6.6% q-o-q. The share of HVA products in total sales increased to 49.9%. MMK Coal's coal concentrate production in Q2 2019 totalled 487 thousand tonnes, down 37.3% q-o-q.H1 2019 highlights vs. H1 2018 MMK Group's total sales of finished products in H1 2019 totalled 5,638 thousand tonnes, down 0.7% year-on-year (y-o-y). MMK Group's sales of HVA products in H1 2019 totalled 2,764 thousand tonnes, up 1.4% y-o-y. The share of HVA products in total sales increased to 49.0%. MMK Coal's coal concentrate production in H1 2019 totalled 1,263 thousand tonnes, down 10.5% y-o-y.MMK Group highlights by key segments PSJC MMK (thousand tonnes) | Â | Q2 2019 | Q1 2019 | % | H1 2019 | H1 2018 | % | | Pig iron | 2,452 | 2,396 | 2.3% | 4,849 | 4,680 | 3.6% | | Crude steel | 3,091 | 3,107 | -0.5% | 6,198 | 6,176 | 0.4% | | Finished products, of which: | 2,730 | 2,731 | -0.1% | 5,461 | 5,592 | -2.3% | | Long products | 452 | 457 | -1.1% | 908 | 892 | 1.9% | | Flat hot-rolled products | 1,166 | 1,180 | -1.1% | 2,346 | 2,498 | -6.1% | | HVA products, of which: | 1,112 | 1,095 | 1.5% | 2,207 | 2,203 | 0.2% | | Thick plate (mill 5000) | 287 | 267 | 7.5% | 554 | 401 | 38.3% | | Flat cold-rolled products | 294 | 319 | -7.9% | 614 | 724 | -15.3% | | Downstream products, of which: | 530 | 508 | 4.3% | 1,039 | 1,078 | -3.6% | | Tin plate | 42 | 34 | 23.4% | 76 | 73 | 4.4% | | Galvanised steel | 338 | 311 | 8.7% | 649 | 642 | 1.1% | | Polymer-coated steel | 70 | 81 | -13.6% | 151 | 178 | -15.5% | | Band | 28 | 28 | 0.5% | 56 | 73 | -23.7% | | Formed section | 42 | 40 | 5.0% | 82 | 79 | 3.4% | | Pipes | 11 | 14 | -21.4% | 25 | 32 | -21.7% | | Shipments by market: | Â | Â | Â | Â | Â | Â | | Russia + CIS | 2,444 | 2,442 | 0.1% | 4,886 | 4,503 | 8.5% | | Export | 286 | 290 | -1.5% | 575 | 1,089 | -47.2% |
(USD / tonne) | Â | Q2 2019 | Q1 2019 | % | H1 2019 | H1 2018 | % | | Â Average price per tonne: | 625 | 578 | 8.1% | 602 | 651 | -7.6% | | Long products | 510 | 480 | 6.3% | 494 | 567 | -12.8% | | Flat hot-rolled products | 551 | 506 | 8.8% | 528 | 584 | -9.6% | | HVA products, of which: | 750 | 698 | 7.5% | 724 | 760 | -4.8% | | Thick plate (mill 5000) | 747 | 712 | 5.0% | 730 | 830 | -12.1% | | Flat cold-rolled products | 629 | 579 | 8.7% | 603 | 634 | -4.8% | | Downstream products, of which: | 818 | 765 | 7.1% | 792 | 819 | -3.3% | | Tin plate | 817 | 777 | 5.2% | 798 | 829 | -3.7% | | Galvanised steel | 802 | 742 | 8.0% | 772 | 792 | -2.5% | | Polymer-coated steel | 981 | 916 | 7.2% | 946 | 986 | -4.0% | | Band | 689 | 653 | 5.5% | 671 | 680 | -1.3% | | Formed section | 827 | 779 | 6.2% | 803 | 838 | -4.2% | | Pipes | 594 | 542 | 9.6% | 565 | 664 | -14.9% |
Pig iron output in Q2 2019 increased by 2.3% q-o-q. This was due to the completion of the scheduled overhaul of the blast furnace No.7 in mid May and productivity growth. At the same time, the volume of steel output in Q2 2019 remained flat q-o-q. The increase in pig iron volumes allowed the company to decrease the share of metal scrap in burden. The volume of shipments in Q2 2019 was flat q-o-q and amounted to 2,730 thousand tonnes. Sustainable shipments were a result of the continued high demand in the domestic market amid the scheduled repairs of rolling equipment. In Q2 2019, the domestic market saw continued high demand for steel products, which was associated with the beginning of the construction season and high volume of orders from manufacturers of large diameter pipes. These factors allowed the Company to maintain shipments to the domestic market flat q-o-q (2,444 thousand tonnes), as a result, the share of shipments to the domestic market amounted to about 90%. The volume of shipments of long products in Q2 2019 remained flat q-o-q and amounted to 452 thousand tonnes amid the recovery of business activity at the beginning of the construction season. The volume of shipments of hot-rolled products for Q2 2019 remained low, which was due to the continued reconstruction of Mill 2500 under the current investment programme. The volume of shipments of HVA products for Q2 2019 increased by 1.5% q-o-q and amounted to 1,112 thousand tonnes. This growth is mainly due to the increase in shipments of thick plate and the high capacity utilisation rates for deep processing production. The decrease in the volume of shipments of cold-rolled products for Q2 2019 by 7.9% q-o-q was mainly due to an increase of galvanised steel production at MMK's site and an increase in sales of polymer-coated steel produced at Lysvensky Metallurgical Plant. In Q2 2019, the volume of shipments of Mill 5000 products increased by 7.5% q-o-q and reached 287 thousand tonnes. This growth was associated with the continued supply of steel for the production of large diameter pipes as part of the implementation of major pipeline projects by Gazprom. In H1 2019, the volume of shipments of Mill 5000 thick plate increased by 38.3% y-o-y and amounted to 554 thousand tonnes. Seasonal increase in demand for construction products allowed the Company to increase shipments of galvanized steel in Q2 2019 by 8.7% q-o-q to 338 thousand tonnes. The decrease in shipments of polymer-coated steel compared to the previous quarter was due to the higher margin of galvanised steel sales in the current market environment. The average selling price, expressed in US dollars, for Q2 2019 increased by 8.1% q-o-q and amounted to USD 625 per tonne. This growth was due to both the recovery of global and Russian steel prices following a significant correction at the end of last year and an increase of HVA products share in the sales mix. MMK - Lysvensky Metallurgical Plant (thousand tonnes) |  | Q2 2019 | Q1 2019 | % | H1 2019 | H1 2018 | % | | Finished products, of which: | 74 | 60 | 22.8% | 135 | 115 | 17.0% | | Electro-galvanised steel (automotive sheet) | 2 | 1 | 98.6% | 3 | 3 | - | | Galvanised steel with polymer coating | 70 | 56 | 24.7% | 125 | 107 | 17.1% | | Galvanised steel with decorative coating (SteelArt) | 3 | 4 | -28.4% | 6 | 5 | 37.7% |
 Finished products output increased by 23% q-o-q in Q2 2019 and was due to the seasonal growth in demand for construction products. A 17% growth in H1 2019, compared to H1 2018 was due to the introduction of a programme to promote construction products, including SteelArt, in H2 2018.   Steel segment (Turkey) (thousand tonnes) |  | Q2 2019 | Q1 2019 | % | H1 2019 | H1 2018 | % | | ММК Metalurji finished products, of which: | 197 | 176 | 11.8% | 373 | 428 | -13.0% | | Flat hot-rolled products | 8 | 7 | 6.9% | 15 | 36 | -58.2% | | HVA products, of which: | 189 | 169 | 12.1% | 358 | 392 | -8.8% | | Galvanised steel | 160 | 129 | 23.9% | 289 | 297 | -2.7% | | Polymer-coated steel | 29 | 39 | -26.6% | 68 | 95 | -27.9% | | ММК Metalurji finished products from ММК steel | 58 | 136 | -63.6% | 217 | 339 | -36.2% |
 Sales of finished products for Q2 2019 amounted to 197 thousand tonnes, up 11.8% q-o-q, due to the higher share of exports sales. The volume of sales of commercial products for H1 2019 decreased by 13.0% y-o-y, mainly due to the continued challenging economic situation in Turkey. The sales volumes were affected by lower sales of flat hot-rolled steel amid high volatility in prices for these products and low marginality. External headwinds, a continued challenging economic situation and political uncertainties continue to negatively affect domestic demand for construction metal products. MMK Coal (thousand tonnes) |  | Q2 2019 | Q1 2019 | % | H1 2019 | H1 2018 | % | | Coking coal mining | 978 | 1,464 | -33.2% | 2,442 | 2,187 | 11.6% | | Coking coal processing | 916 | 1,422 | -35.6% | 2,337 | 2,752 | -15.1% | | Mined | 786 | 1,403 | -44.0% | 2,188 | 2,268 | -3.5% | | Purchased | 116 | 19 | - | 135 | 466 | -71.1% | | Toll | 14 | 0 | - | 14 | 17 | -19.5% | | Coking coal concentrate | 487 | 777 | -37.3% | 1,263 | 1,412 | -10.5% |
 The volume of coking coal production in Q2 2019 decreased by 33.2% q-o-q and amounted to 978 thousand tonnes. This decrease was due to the maintenance works during the quarter. The decrease in coal concentrate production by 37.3% q-o-q in Q2 2019, as well as the decrease y-o-y in H1 2019, were due to ramping up of the beneficiation plant to its design capacity following the reconstruction. It is expected, that the plant will reach its full design capacity in Q4 2019. The volume of coking coal production in H1 2019 increased by 11.6% y-o-y to 2,442 thousand tonnes due to the changes in the maintenance works schedule. Outlook The Company's management expects that in Q3 2019 demand for steel in the domestic market will remain strong and with the completion of another stage of reconstruction at hot-rolling Mill 2500, this should have a positive impact on the sales volumes of MMK Group. The maximum capacity utilisation of high-margin production units and continued high price premium in the domestic market should help offset the higher prices for iron ore in H1 2019, which should support MMK Group's financial results in Q3 2019.   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 2018, the company produced 12.7 mln tonnes of crude steel and 11.7 mln tonnes of commercial steel products. MMK Group had sales in 2018 of USD 8,214 mln and EBITDA of USD 2,418 mln.  Contacts Investor Relations Department: Andrey Serov +7 3519 25-30-29 ir@mmk.ru Communications Department: Dmitry Kuchumov Dmitry Bulin +7 499 238-26-13 +7 499 238-26-13 kuchumov.do@mmk.ru bulin.dn@mmk.ru  Â
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