MMK's EBITDA up 0.7% to $455 mln in Q2, beats forecast
MOSCOW. Aug 7 (Interfax) - MMK Group, the core asset of which is Magnitogorsk Iron & Steel Works (MMK) , increased its EBITDA to IFRS by 0.7% quarter-on-quarter to $455 million in the second quarter of 2017, the Russian company reported.
The group's revenue grew by 16% to $1.926 billion in the second quarter. Analysts polled by Interfax expected MMK's EBITDA to drop to $435 million in the second quarter and revenue to increase by 2.2% to $1.696 billion.
MMK said it is seeing a seasonal revival in demand on the domestic market, setting the stage for growth in sales in the third quarter. The company's management expects growth in steel prices seen since July on the company's main export markets to support domestic sale prices in the third quarter.
The company's profit jumped 23.2% to $297 million in the second quarter, thanks in part to $149 million in profit generated by restoring provisions made for depreciation of construction work in progress. Analysts expected the company's profit to drop to $220 million.
Free cash flow totalled $203 million, up more than 13-fold from the previous quarter as the company achieved stable levels of free cash flow after a cash outflow to working capital in the first quarter had a negative impact on free cash flow levels.
MMK financial highlights to IFRS for Q2 and H1 2017, $ mln:
| Q2 2017 | Q1 2017 | % | H1 2017 | H1 2016 | % | |
| Revenue | 1 926 | 1660 | 16% | 3 586 | 2 602 | 37.8% |
| Cost of sales | -1 389 | -1 171 | 18.6% | -2 560 | -1 814 | 41.1% |
| Operating profit | 299 | 319 | -6.3% | 618 | 624 | -1% |
| EBITDA, including | 455 | 452 | 0.7% | 907 | 702 | 29.2% |
| - steel (Russia) | 416 | 423 | -1.7% | 839 | 645 | 30.1% |
| - steel (Turkey) | 9 | 11 | -18.2% | 20 | 34 | 41.2% |
| - coal | 26 | 24 | 8.3% | 50 | 23 | 117.4% |
| EBITDA margin | 23.6% | 27.2% | 25.3% | 26.9% | ||
| Net profit | 297 | 241 | 23.2% | 538 | 486 | 10.7% |
| Free cash flow | 203 | 15 | 13.5-fold | 218 | 329 | -33.7 |
At the end of Q2 2017, MMK Group's net debt/EBITDA ratio was 0.12x.
The company invested a total of $163 million in Q2 and $284 million in H1. The company expects capex to be $590 million for the year.
EBITDA for the Russian steel segment fell slightly in Q2 compared to Q1 at $416 million due to structural deterioration in the sales range and a reduction in the share of high value added products sold.
The cost of sales for a tonne of slab in Q2 fell to $290, compared to $301 in Q1.
The steel segment's total revenue for Q2 was up 14.8% quarter-on-quarter to $1.822 billion. This growth is due to a 4% increase in sales volumes against the backdrop of a stronger ruble.
