MMK Reports 3rd Quarter, Nine-Month Results
12/12/2008 - Magnitogorsk Iron and Steel Works reports net income of US$ 667 million on revenues of US$ 3.529 billion for the third quarter and net income of US$ 1.483 billion on revenues of US$ 9.182 billion for the nine months ended September 30, 2008.
Magnitogorsk Iron and Steel Works (MMK) reported consolidated financial results for the quarter and nine months ending September 30, 2008. Results were reported in accordance with IFRS (International Financial Reporting Standards).
For the third quarter, MMK reported net income of US$ 667 million on revenues of US$ 3.529 billion, which compares to net income of US$ 633 million on revenues of US$ 2.15 billion in the previous quarter.
For the first nine months, MMK reported net income of US$ 1.483 billion, reflecting a 42% increase over year-earlier nine-month net income of US$ 1.041 billion. Revenues of US$ 9.182 billion reflect a 49% compared to year-earlier nine-month revenues of US$ 6.15 billion.
Nine-month EBITDA of US$ 2.673 billion reflects a 41% increase compared to year-earlier nine-month EBITDA of US$ 1.899. The company also reported a nine-month EBITDA margin of 29.1%.
Operating Results—The company said that demand for its products continued to be strong into the third quarter, which helped to provide support for steel prices. MMK’s hot-rolled coil price grew by 53% through the first nine months as compared to the first nine months of 2007.
Crude steel production reached 10.309 million tonnes through the first nine months, a 3.8% increase compared to the first nine months of 2007. Commercial steel products output reached 9.369 million tonnes through the same period, a 3% increase compared to the first nine months of 2007
Based on recent weakening of the steel market, MMK adjusted its production levels for the fourth quarter in order to support prices and meet decreased demand. The management views recent production cuts at MMK as a sensible and prudent response to the current conditions.
Financial Position—MMK said that its financial position remains sound, its cash flow generation is strong, and its total debt is US$ 1.478 billion. Short-term debt, including the current portion of long-term debt, amounted to US$ 1.220 billion. Short-term debt includes revolving credit facilities in the amount of US$ 434m arranged to finance trading companies – members of MMK Group.
The company’s cash position equals US$ 985 million as of September 30, 2008, which is US$ 179 million or 22% higher compared to the H1 08 figure. Total cash position and equivalents amounts to US$ 1.106 billion as of September 30, 2008, with net debt of US$ 372 million.
“The last two months have witnessed some of the most difficult trading conditions in the steel sector in many years,” said Victor Rashnikov, Chairman of MMK Board of Directors, commenting on the results. “However, I would like to emphasize that MMK remains financially strong. Our modernized asset base, diversified steelmaking technologies, strong balance sheet, broad product mix and high level of internally generated electricity provide us with sufficient flexibility in current conditions.
“Record steel prices and generally favorable market environment of the first nine months of 2008 provided support for our margins in this period and it leads us to expect good full-year results,” added Rashnikov. “I am confident that the business is well positioned to emerge as the market leader once the market recovers.”
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 comprises 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 value added goods. In 2007 the company produced 13.3 million tonnes of crude steel, and 12.2 million tonnes of commercial products. US GAAP sales stood at USD 8.2 billion, with net income at USD 1.8 billion.
