Russian steel producer Magnitogorsk Iron and Steel Works (MMK) has announced its financial results for the first quarter of 2020.
In the first quarter, MMK registered a net profit of $131 million, down 41.8 percent compared to a net profit of $225 million in the same quarter of the previous year due to the devaluation of the Russian currency at the end of the first quarter this year, while rising by 48.6 percent from the previous quarter. Besides, the company's revenue decreased by 6.9 percent year on year due to a decline in sales volumes amid the correction in global steel prices, while it fell by 0.7 percent quarter on quarter to $1.71 billion due to the decline in sales volumes amid the scheduled reconstruction of hot rolling mill 2500.
In the first quarter, MMK's EBITDA increased by 0.5 percent year on year and 31.9 percent quarter on quarter to $442 million, with the EBITDA margin rising to 25.8 percent from 24 percent in the corresponding period of 2019 and from 19.5 percent in the previous quarter. MMK stated that the lower cost of sales compared to the first quarter of the previous year offset lower steel prices.
Also, the company’s free cash flow amounted to $110 million in the given quarter, falling by 59.6 percent when compared to the previous quarter and down by 57.7 percent year on year.
As for the second quarter outlook, MMK sees risks of declining sales volumes amid weaker business activity due to the unfavourable epidemiological situation in Russia and the world. The company stated that it will continue the scheduled equipment repairs which are leading to lower production volumes in the second quarter this year. MMK expects coronavirus-related market uncertainty to put significant pressure on global prices for metal products in the given period. The company also expects its capital expenditure to increase in the second quarter compared to the first quarter this year due to the completion of the reconstruction of hot rolling mill 2500.