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MMK report record EBITDA for FY 2018

Steel News - Published on Mon, 11 Feb 2019

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EBITDA for FY 2018 amounted to USD 2,418 million up 19.0% YoY, the highest in the Company’s history. The EBITDA margin increased to 29.4%. Net profit for FY 2018 amounted to USD 1,317 million, up 10.8% YoY. Free cash flow for FY 2018 was up nearly 1.5x on FY 2017 and amounted to USD 1,027 million.

Q4 2018 highlights vs Q3 2018
The decrease in revenue for Q4 2018 was due to the fall in the average sale price of finished products against a backdrop of a seasonal decrease in sales of steel products. In Q4 2018, the cost of sales grew QoQ, mainly due to higher prices of key raw materials on the domestic market. As a result, EBITDA decreased by 20.0% on the previous quarter. EBITDA margin amounted to 27.4%. Quarterly profit amounted to USD 245 million. One-off factors that had an impact on profit include a positive FX effect of USD 39 million, impairment of Steel (Turkey) segment in the amount of USD 258 million and restoration of the provision created in 2013 for impairment purposes of Steel (Russia) segment in the amount of USD 256 million. FCF amounted to USD 239 million.

FY 2018 highlights vs FY 2017
Revenue grew 8.9% YoY, thanks to higher sales volumes on the back of increased average sales prices by USD 46 per tonne, or 8.0%. In FY 2018, EBITDA grew 19.0% YoY while EBITDA margin amounted to 29.4%. This significant growth in EBITDA was due to finished product prices growing faster than raw materials prices, as well as share of HVA products reaching 46.5% of total Group sales. Net income for the period grew by 10.8% YoY. FCF for the period grew 48.0% YoY, amid favourable conditions in the Company’s key markets, high steel prices, and continued growth in operational efficiency.

Steel segment (Russia)
Revenue for FY 2018 grew by 8.5% YoY and amounted to USD 7,826 million. This growth was due to increased sales volumes, improved sales mix and favourable price environment on the Company’s key markets. Revenue for Q4 2018 amounted to USD 1,850 million, down 8.6% QoQ. This decline was due to a decrease in the global price of steel products along with the decline in sales volumes. These factors were partly offset by improved sales mix. The segment's EBITDA for Q4 2018 amounted to USD 516 million, down 17.8% QoQ. The main factor that influenced this was the growth in the cost of sales (due to more expensive key raw materials) amid a decrease in revenue. The cash cost of a tonne of slab in Q4 2018 amounted to USD 298 (compared to USD 276 per tonne in Q3 2018). The Company’s profitability was positively affected by the results of a programme aimed at increasing operational efficiency and optimising costs, which enabled the Company to reduce costs by approximately USD 13 million in Q4 2018. Overall since the start of the year, the Company has reduced costs by USD 70 million.

Steel segment (Turkey)
MMK Metalurji's revenue for Q4 2018 amounted to USD 158 million, up 42.3% QoQ. This growth was due to an increase in the volume of sales of finished products by 47.0% QoQ due to higher export sales. Despite such a significant increase in sales volumes, lower sale prices and higher transportation costs resulted in a decrease in EBITDA for Q4 2018 to USD -15 million. The decline in the company's performance was due to an overall downturn in the Turkish economy amid economic instability and depreciation of the local currency, resulting in a decrease in effective domestic demand.

Coal segment
The revenue of the coal segment for FY 2018 amounted to USD 340 million, up 6.3% YoY. The decrease in revenue in Q4 2018 by 2.3% QoQ was due to the decline in coal concentrate production by 3.4% QoQ. In FY 2018, the segment's EBITDA increased by 31.7% YoY and amounted to USD 137 million. This was due to an increase in the operational efficiency of the business, an increase in the production and processing of MMK's own coking coal and a decrease in the purchase of coal from third parties.

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Posted By : Rabi Wangkhem on Mon, 11 Feb 2019
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