Page 143 - RusRPTAug21

Magnitogorsk Iron and Steel Works (MMK) released 2Q21 Operating Results. Sales rose 14% to 3.3mt, with HVA products as a share of total sales up 2.1ppt
q/q.
· Total steel sales grew 14% q/q and 49% y/y to 3.3mt, on elevated
steel demand
· Steel output rose 3% q/q and 44% to 3.4mt, reflecting favorable
market conditions
· Sales of premium steel products grew 22.5% q/q to almost 1.18mt
– following the reconstruction of Reverse Cold Rolling Mill 1700 – but fell 0.3% y/y. The share of premium products in total sales portfolio grew to 35.8% y/y vs 33.7% in 1Q21
· Realized prices surged 33% q/q and 82% y/y to $928/t
· Coking coal concentrate production rose 7% q/q and 27% y/y to
874kt, driven by stronger demand from MMK, amid favorable
market conditions
· MMK expects a seasonal recovery of demand in Russia and
favorable conditions in global markets to positively affect 3Q21
sales
· According to MMK, 3Q21 sales will also be supported by the start
of hot tests at the EAF facility, with a casting and rolling module at the Turkish asset, as well as by the completed reconstruction of Reverse Cold-Rolling Mill 1700 and 100% utilization of premium products equipment
· CapEx for 3Q21 is expected to fall q/q – in line with the implementation schedule.
Novolipetsk Mining Kombinat (NLMK) has reported strong 2Q21 earnings, 12% above the consensus and 15% above us on EBITDA. FCF generation came broadly in line with our estimates, though the dividend payout again exceeded 100% of FCF and DPS came 12% above our forecast, yielding 5.6%.
We have marked-to-market our 2H21 steel price forecasts and now expect a more gradual decline in prices in 2022 towards mid-cycle averages. We reiterate our Buy with an unchanged 12-month Target Price of USD 16/GDR.
Earnings outperform estimates. EBITDA came 12% above consensus and 15% above us, though revenues were broadly in line, with a surprise coming from the costs side. Meanwhile, on FCF the consensus and we were right. DPS, though, still positively surprised, given the above 100% FCF payout.
Prices marked-to-market for 3Q-4Q21 and 2022. We now expect a gradual normalisation of steel and bulks prices in the medium term towards the mid-cycle averages. This yields an 11% higher EBITDA forecast for 2021F (partly offset by the effect of export tariffs) and 80% for 2022F.
Export tariffs to pressure 3Q-4Q21 earnings. We estimate that NLMK’s EBITDA peaked in 2Q21 amid a more than USD 200mn
143 RUSSIA Country Report August 2021 www.intellinews.com