MMK issues Q1 financial results under IAS, posts $94 million profit

The Russian steelmaking group Magnitogorsk Iron and Steel Works (MMK) has issued its consolidated financial results for the first quarter of 2010 under the International Accounting Standards (IAS).

Accordingly, in Q1 2010 MMK registered a net profit of $94 million, up from a $110 million loss in the same period last year, its revenue increased to $1.652 billion, compared to $965 million in Q1 2009, while its EBITDA more than tripled to $364 million from $99 million.

"The results growth is mainly driven by increased production volumes as well as by increased average prices (up 34 percent year on year) due to the expanding share of HVA (high value-added) products. Such a strategy enables us to generate the necessary cash-flow and maintain a high profitability level," reads the company's statement.

Accordingly, in Q1 2010, MMK continued to increase the volume of domestic shipments, meeting the growing demand from the key steel consuming sectors. Shipments to Russia and the CIS accounted for 64 percent of its Q1 overall shipments. In money terms, sales to Russia and CIS accounted for 71 percent of total steel product sales, compared to 66 percent in Q1 2009. Pipe manufacturers remained the major customers of MMK in the domestic market in Q1 2010 with a 38 percent share of MMK's overall shipments to the Russian market.

During the period in question, MMK's key export market remained the Middle East (53 percent of all export shipments in Q1 2010), followed by Europe (22 percent), North, Central and Latin America (10 percent), Africa and Asia.
In Q1 this year, MMK's short-term debt amounted to $866 million, including $252 million of revolving credit facilities of traders within MMK Group. Thereby, its net short-term debt amounted to $614 million.

Cash outflow to investments into property and equipment grew in Q1 2010 to $620 million from $388 million in Q4 2009. The amount of capital expenditure grew in particular due to the investments of the parent company, such as in the commissioning of continuous slab caster No. 6 and a secondary steel treatment unit, as well as investments of subsidiaries, including the development of the MMK-Atakas steelmaking complex in Turkey and implementation of the Belon investment program. 

MMK enjoys 100 percent guaranteed supplies of necessary raw materials, is 30 percent self-sufficient in iron ore, 50 percent in coking coal, 100 percent in scrap and 85 percent in electricity.