MMK Q1 EBITDA at $294 mln under IFRS, matching forecast
MOSCOW. June 20 (Interfax) - Magnitogorsk Iron & Steel Works (MMK) had earnings before interest, taxes, depreciation and amortization (EBITDA) equal to $294 million in the first quarter of 2014 under international financial reporting standards (IFRS), slightly higher than Interfax's consensus forecast of $291 million.
EBITDA in the first quarter fell nearly 6% compared with the fourth quarter of 2013, the company said in a press release. The EBITDA margin was 15.6%.
"The decrease in EBITDA was due to a decline in steel prices in dollar terms on the domestic market due to the ruble devaluation effect. Domestic prices recovery to the export parity level has started in March and the key effect of such growth will be demonstrated in Q2 2014," the press release says.
"In Q2 2014 the Group expects increased production and sales volumes as compared to the previous quarter amid growth of domestic steel prices. In addition, declining global iron ore prices will support MMK Group's financial results for Q2 2014," it says.
MMK financial highlights (IFRS, $ mln):
| Q1 2014 | Q4 2013 | % | |
| Revenue | 1 879 | 1 869 | 0.5% |
| Cost of sales | (1 529) | (1 537) | -0.5% |
| Operating profit | 78 | 35 | 120% |
| EBITDA, incl. | 294 | 312 | -5.8% |
| - Steel segment (Russia) | 267 | 293 | -8.9% |
| - Steel segment (Turkey) | 13 | 14 | -7.1% |
| - Coal | 15 | 4 | 275% |
| EBITDA margin | 15.6% | 16.7% | -1.1 p.p. |
| Net profit (loss) | (79) | (2 155) | - |
Revenue in the three months increased 0.5% quarter on quarter to $1.88 billion, which also nearly matched the consensus forecast compiled by Interfax. The growth was mainly driven by increased sales volumes at the Magnitogorsk facility amid a decline in the average sales price, MMK said.
The slight reduction in cost of sales was primarily due to a decline in depreciation as the result of an impairment of fixed assets in 2013.
The higher operating profit was the result of a 12.4% decline in SG&A costs to $44 million.
The net loss of $79 million in the first quarter was primarily due to an exchange loss of $118 million. "Excluding this factor, the profit for Q1 2014 would have been $39 million," the press release says. Several analysts surveyed by Interfax thought MMK might report a net profit for the three months, but others forecast a net loss.
"At the end of Q1 2014 MMK Group's net debt (including short-term deposit of $129 million) was $2.902 billion, down by $124 million from the end of 2013," it says.
Total debt was nearly unchanged at $3.178 billion.
"Short-term debt and the current portion of long-term debt of MMK Group as of the end of Q1 2014 amounted to $1.012 billion, which is fully covered by liquid financial assets at the company's disposal," it says.
Cash and cash equivalents totaled $147 million as of March 31, 2014 and liquid securities (a stake in FMG) totaled $756 million.
In addition, MMK had about $1.7 billion in undrawn bank credit lines as of the end of the first quarter.
Investment in fixed assets declined 51.5% quarter-on-quarter to $131 million. "This decline was due to both an overall decrease of planned capital expenditure for 2014 as well as early commissioning of blast furnace No. 6 in December 2013, and recognition of these investments as capital expenditure for Q4 2013," MMK said.
"Notwithstanding cash outflow for working capital financing in Q1 2014, good operational results and decreased capital expenditure allowed MMK Group to achieve a positive free cash flow of $33 million in Q1 2014, up 17.9% q-o-q."
