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MMK Reports 2nd Quarter Results

09/16/2010 - OJSC Magnitogorsk Iron and Steel Works (MMK) announced financial results under Russian Accounting Standards for the second quarter of 2010, including a net profit of RUR4.678 billion on sales of RUR53.117 billion.

OJSC Magnitogorsk Iron and Steel Works (MMK) announced financial results under Russian Accounting Standards (RAS) for the second quarter of 2010, including a net profit of RUR4.678 billion on sales of RUR53.117 billion.
 
Results reflect MMK (parent company) operations only, and could vary significantly from the consolidated financial results under IAS.
 
MMK RAS sales of RUR53.117 billion reflect a 26% quarter-on-quarter increase. The increase was driven by growth of steel output and average steel price.
 
Operating income amounted to RUR9.109 billion, reflecting a quarter-on-quarter growth of 53%, driven by increased output and finished steel products sales, and also by growth of average steel price per tonne exceeding costs inflation.
 
Second quarter net profit (under RAS net revaluation of investment in securities) was RUR4.678 billion reflecting a 24% quarter-on-quarter increase. MMK said its net profit was influenced significantly by the effect of revaluation of securities on the company’s balance sheet.
 
Net profit grew by RUR2.527 billion due to revaluation in Q1 2010, while in Q2 2010 the revaluation of investment in securities led to a net profit decrease of RUR4.001 bn. Net profit excluding revaluation of investment in securities increased by 24% in Q2 2010 quarter-on-quarter.
 
In the second quarter, the company’s share of HVA products grew from 30% to 35%, quarter-on-quarter. MMK’s crude steel output amounted to 2.984 million tonnes, an increases of 252 thousand tonnes (9%) compared to the previous quarter (Q1 2010). Finished steel products output, at 2.623 million tonnes, reflected a quarter-on-quarter increase of 170 thousand tonnes (7%).
 
The company noted that its increase in steel output was driven by an increased output of HVA products, primarily due to increased production of thick plate at Plate Mill 5000 (production grew by 52 thousand tonnes or 29%, quarter-on-quarter).
 
The company increased its output of high value-added products by 174 thousand tonnes (24%) in the second quarter, and its share in finished products output grew from 30% to 35%.
 
MMK’s average steel price amounted to USD647 per tonne in the second quarter, reflecting a quarter-on-quarter growth of 15.1%. Domestic shipments reached 1.712 million tonnes, accounting for 71% of revenue. Share of MMK domestic shipments in volume terms grew from 64% in Q1 2010 to 65% in Q2 2010.
 
OJSC MMK is among the world's largest steel producers and is one of the leaders of Russia's steel industry. MMK turns out a broad range of steel products with a predominant share of higher value added goods. In 2009 the company produced 9.6 million tonnes of crude steel and 8.8 million tonnes of commercial steel products. MMK Group revenue in 2009 stood at USD 5.081 billion, EBITDA at USD 1.285 billion, and profit for the period was USD 219 million.