MMK Group announced IFRS Results for Q3 and 9M 2011

MMK announced its consolidated financial statements under IFRS for Q3 and 9M 2011.

9M/Q3 2011 Financial Performance Highlights:

MMK Group 9M 2011 sales amounted to USD 7,063 million, 22% higher y-o-y. MMK Group Q3 2011 sales amounted to USD 2,430 million, in line with Q2 2011. Growth was driven by increased revenue from sales of high value added (HVA) products (up 29% y-o-y for 9M 2011 and up 11% q-o-q for Q3 2011). The share of (HVA) products in MMK Group’s sales was 37% in 9M 2011 and 34% in Q3 2011.

9M 2011 EBITDA totaled USD 1,133 million, 6% lower y-o-y. Q3 2011 EBITDA totaled USD 350 million, a q-o-q decline of 8%.

In Q4 2011 steel production is expected to see a slight q-o-q decline in connection with the traditional seasonal slowdown in activity on both domestic and export markets.

Sales growth in 9M 2011 was driven by increased revenue from HVA products, which grew at a faster pace and amounted to USD 1,547 million (29% higher y-o-y); revenue from HVA sales in Q3 2011 increased 11% q-o-q and equaled USD 573 million.

MMK’s average steel price decreased by 6% q-o-q in Q3 2011 to USD 760. This decline was primarily due to the USD strengthening against the RUB and changes in the product assortment.
The contract price for iron ore was 2% lower in Q3 2011 and coking coal price decreased 3%, while scrap price remained stable. The decrease in average MMK steel prices contributed to a 42% q-o-q decline in operating profit in Q3 2011.

Q3 2011 EBITDA amounted to USD 350 million and MMK’s EBITDA margin was 14.4% Q3 2011 EBITDA was 8% lower q-o-q, primarily due to lower average steel prices while raw materials prices remained almost unchanged at high levels. The loss for Q3 2011 amounted to USD 205 million. This was due to a negative FX effect of USD 252 million and an impairment of fixed assets of USD 12 million. Excluding these factors, the profit for 3Q 2011 equaled USD 59 million.

Balance Sheet Highlights:

Total assets as of September 30, 2011 declined by 2% from December 31st, 2010, and amounted to USD 16,327 million. Property, plant & equipment (PP&E) declined by 4% during the 9-month period to USD 11,721 million at the end of Q3 2011. Gross debt at 30 September 2011 was USD 4,391 million. During 9M 2011, MMK borrowed USD 2,375 million and repaid USD 1,440 million in debt. Cash and cash equivalents together with highly liquid assets amounted to USD 1,317 million at the end of Q3 2011, bringing net debt at the reporting date to USD 3,074 million.

MMK invested USD 264 million in PP&E during Q3 2011 (USD 328 million in Q2 2011, USD 381 million in Q12011, USD 543 million in Q4 2010). Total planned capital expenditure (capex) for 2011 is USD 1.1 billion (2010: USD 2.2 billion).

Capex is focused on construction of MMK’s plant in Turkey and Mill 2000 in Magnitogorsk, which is designed to produce high-quality automotive cold-rolled steel. These projects are part of MMK’s strategy to increase production of HVA products and substitute imports in the Russian and Turkish markets.

MMK Group Operational Highlights:

• Crude steel output in 9M 2011 amounted to 9.1 million tons (+5% y-o-y).

• Finished steel products output in 9M 2011 equaled 8.3 million tons (+6% y-o-y).

• MMK Group HVA steel products output was 3,038 k tons in 9M 2011 (+4% y-o-y)