Page 157 - RusRPTNov20

flat steel products (HRC, in $/t) declined 3% q/q (-21% y/y) while prices for long steel (in $/t) gained 1% q/q (-21% y/y). Pricing for steel slab, a product mainly sold on export markets, recovered 22% q/q (+2% y/y, FOB Black Sea) thanks to supply tightness and the recovery in demand on export markets. In the US, steel prices declined 1% q/q (-11% y/y) while the EU saw them grow 5% q/q (-4% y/y) in part due to FX fluctuations. NLMK will report its 3Q20 results on 21 October.
Russian metals major Magnitogorsk Iron and Steel Works (​MMK​) reported a 200% quarter-on-quarter ​jump in net profit to $209mn in 3Q20 under IFRS, while still being down 33% in year-on-year terms. As reported by bne IntelliNews,​ r​ eported a 23% q/q improvement​ in steel sales in 3Q20. MMK's revenues gained 23% q/q to $1.6bn, supported by the growth in sales volumes and higher steel prices, while Ebitda was up by 55% q/q to $350mn.
Magnitogorsk Iron and Steel Works​ (MMK) has reported a healthy 3Q20 trading update, showing a nice pickup in steel production and sales​. Analysts expect EBITDA to have risen 50% q/q in 3Q20 to $340mn, while FCF should come in at a strong $185mn, for a 3.6% yield. However, due to a seasonal slowdown in domestic demand, they don't see further upside to earnings in 4Q20 and thus see 10% downside to the 2H20 Bloomberg EBITDA consensus forecast. At spot commodity prices and the current $/RUB, MMK is trading at a 2021E EV/EBITDA of 3.6, 7% FCF yield and a yield on dividends to be paid in 2021 of 10% (versus 12% for Severstal and NLMK). Crude steel output recovered 22% q/q in 3Q20 to 2.9mn tonnes, thanks to higher steel demand after the lockdown in Russia and the completion of overhauls to its blast furnace and HRC Mill 2500. Sales of steel products jumped 23% q/q thanks to seasonal and post-lockdown pent-up demand from the domestic construction sector. Sales of HVA products rose 17% q/q, though their share in the total sales mix declined 3 pp q/q to 49%. Despite the slightly worse sales mix, the average realized steel product price climbed 2.5% q/q; the growth is in line with the reported figure for Severstal and our estimate for NLMK, both of, which reported sales mix improvements. We think this is attributable to the company having started to shift sales from exports to the domestic market, which is more profitable for MMK given the high transport cost to ports. MMK will report its geographical sales mix with its 3Q20 IFRS results.
MMK held an investor call on October 22. The key highlights are given below.
· MMK has a positive view on the Chinese market and China steel prices in the next six months due to the Chinese government stimulus programme and the launch of new infrastructure projects.
· MMK expects Russian domestic steel consumption to grow 3-4% YoY in 2021, implying a recovery to normal levels. Also, domestic demand is to be supported by th enational projects, which are now being ramped up, and the effect from them is to materialise in 2021,
157 ​RUSSIA Country Report​ November 2020 www.intellinews.com