Russian steel producer Magnitogorsk Iron and Steel Works (MMK) has announced its financial results for the second quarter of 2020.
In the second quarter, MMK registered a net profit of $58 million, down 55.7 percent compared to the previous quarter. Besides, the company's revenue decreased by 25.8 percent quarter on quarter to $1.268 million due to a decline in sales volumes amid the scheduled reconstruction of the hot rolling mill 2500 and the volatility of steel prices due to negative market trends in Russia and globally, in particular. Nevertheless, the launch of hot rolling mill 2500 in July is expected to boost sales volumes in the third quarter.
In the second quarter, MMK's EBITDA declined by 48.9 percent quarter on quarter to $226 million, reflecting the challenging market environment. In the meantime, the EBITDA margin decreased to 17.8 percent from 25.8 percent in the previous quarter.
In the given period, the company’s free cash flow totaled a negative $18 million. It was driven mainly by lower margins and the working capital build-up due to higher export sales amid deteriorating conditions in the domestic market.
As a result, in the first half of the current year MMK's net profit declined by 62 percent year on year to $189 million, caused by worsening market conditions and an increase in foreign exchange loss due to the rouble’s devaluation. MMK's EBITDA during the January-June period of the current year decreased by 28.7 percent year on year to $668 million, with the EBITDA margin falling to 22.4 percent versus 24.4 percent in the same period of the previous year. In the first half of this year, the company’s revenue declined by 22.3 percent year on year to $2.978 million.
As for the outlook, MMK expects the recovery of domestic demand and the recovery of hot rolled coil prices in the Black Sea region that emerged late in the second quarter will continue in the third quarter, with a positive impact on the company’s performance.