MMK could keep roll output flat in Q2, destocking to lift sales
MOSCOW. May 11 (Interfax) - MMK Group, whose flagship enterprise is Magnitogorsk Iron & Steel Works (MMK) , could produce around 2.7 million tonnes of roll in Q2, as much as in Q1 2017, with capacity utilization slightly higher than in the previous quarter, Economics Director Andrei Eremin said on a conference call.
"We think we'll be operating at around 900,000 tonnes of roll per month," Eremin said, adding that maintenance affected capacity utilization in the first quarter. But output could draw level with Q2 last year it the market picks up in June he said.
MMK produced 2.7 million tonnes of commercial roll in Q1 2017 and 3 million tonnes in Q2 2016.
Roll sales in Q2 this year could be higher than in Q1 if inventory built up in the past two quarters is sold. "We think we'll be destocking in Q2, at the end of May or early June," Eremin said.
Steel prices on the domestic market could edge down until the end of Q2. "We see prices falling in the external markets and realize that this will affect domestic prices with a lag of one or two months. This has already begun, at the end of April. And we see moderate decline continuing in the domestic market in May and June," he said.
Asked about dividends for the first half of the year, Eremin said these could exceed 50% of free cash flow. "According to the new dividend policy, we plan to pay at least 50% of FCF - this doesn't stop us from paying more than half. We'll be looking at how the situation unfolds and reach a decision depending on the situation," he said.
Also, in keeping with plans aired previously, MMK plans to have a cash pile of $500 million by the end of the year.