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Russian steelmaker Magnitogorsk Iron & Steel Works announced its EBITDA for FY 2017 amounted to USD 2,032 million, up 23.8% as compared to adjusted EBITDA in FY 2016.
Q4 2017 highlights vs Q3 2017
Revenue declined in Q4 2017 due to a seasonal decrease in domestic sales volumes.
Cost of sales in Q4 2017 declined at a faster pace than revenue due to a gap between the growth in key raw materials prices and the growth in steel prices amid a stronger ruble vs US dollar.
As a result, EBITDA grew 11.1% on the previous quarter, delivering an EBITDA margin of 30.4%.
Quarterly profit grew 35.9% on the previous quarter and amounted to USD 375 million. This growth was mainly due to a significant growth in metal prices in both the Company’s domestic and export markets. One-off factors which had an impact on profit include a positive effect of USD 36 million from asset values being higher than their purchase price.
FCF amounted to USD 116 million. The decline on the previous quarter was due to a seasonal cash outflow to working capital (growth in winter raw materials and finished products stocks) of USD 145 million.
FY 2017 highlights vs FY 2016
Revenue grew 34.0% year-on-year. This was due to the increase in average sales prices (by USD 143 per tonne or 33.1%), recovery of the share of domestic sales, and a stronger ruble rate.
In FY 2017, EBITDA grew 23.8% as compared to EBITDA in FY 2016, adjusted to account for proceeds from the sale of a stake in FMG. The EBITDA margin in 2017 was 26.9%. This significant year-on-year growth was due to the increased influence of growth in prices as compared to the effect of growth in raw material costs, as well as due to an enhanced sales structure.
Profit for the period amounted to USD 1,189 million, up 7.0% y-o-y, while FCF slightly declined to USD 694 million. This decline was due to a planned increase in CAPEX.
Balance-sheet and cash-flow highlights
Debt
In Q4 2017, MMK Group’s total debt amounted to USD 544 million, which is fully in line with its conservative leverage policy.
As of 31 December 2017, the Company had USD 556 million on its accounts. High profitability for the year and a low debt burden enabled the Company to increase cash liquidity by USD 248 million as compared to 31 December 2016 and to exceed the Company’s debt obligations.
Capital expenditure and cash flow
In Q4 2017, capital expenditure amounted to USD 237 million. The increase compared to the previous quarter is due to the planned implementation of investment projects (launch of equipment procurement for sinter plant No. 5) and is partially due to the stronger RUB exchange rate against the USD.
In FY 2017, USD 664 million was invested in fixed assets, in RUB equivalent this sum was in line with the planned investment volume for 2017.
The seasonal slowdown of business activity on the domestic market and a need to build up winter stocks of key raw materials (including higher stocks of scrap before launch of blast furnace 1 scheduled maintenance) resulted in growth in inventory by USD 265 million. This outflow was balanced by a release of USD 162 million from accounts receivable and payable. As a result, total cash outflow to working capital in Q4 2017 amounted to USD 145 million.
Cash outflow to working capital and higher CAPEX in Q4 2017 resulted in a decline in FCF to USD 116 million.
In FY 2017, FCF amounted to USD 694 million and was just slightly lower than in FY 2016, despite an increase in CAPEX by USD 201 million and USD 294 million cash outflow to working capital.