Page 127 - RusRPTMay20

subsequently treated at the Amursk POX. The project timeline assumes a further reserve and resource upgrade in 3Q21, which should lead to a potential investment decision in 4Q21.
● Steel
Severstal​ released 1Q20 Trading Update. ​The results were mostly in line with BCSe on sales volumes, but missed our estimate on realized steel prices. Steel output rose 5% q/q to 2.85mt, driven by the higher number of castings in 1Q20 and the completion of S-T maintenance works at steelmaking facilities in 4Q19 Steel sales rose 4% q/q to 2.75mt, driven by rising sales of HRC, color coated coil and long products Average realized steel price fell 9% q/q with share of HVA falling to 42% vs 45% in 4Q19 due to increased shipments of HRC, long steel and fewer sales of LDPs Iron ore sales rose 1% q/q to 4.4mt, driven by rising pellets sales (up 6% q/q to 2.9mt), which was partially offset by lower iron ore concentrate sales – down 8% q/q to 1.5mt, impacted by a planned decline in production at Olcon Coking coal concentrates sales fell 29% q/q to 0.95mt on a decrease in run-of-mine production due to the scheduled long-wall reposition at the Komsomolskaya mine in 1Q20.
Magnitogorsk Iron and Steel Works​ (MMK) released 1Q20 Trading Update​. The results beat BCSe, as the improvement of realized prices q/q offset lower consolidated steel sales volumes. Steel output fell 2% q/q to 3.02mt due to maintenance works at converter facilities and scheduled reconstruction of hot rolled Mill 2500 Total sales of finished products fell 1% q/q to 2.74mt, driven mainly by a decline in flat steel products sales Share of HVA products sales increased to 47.7% in 1Q20 from 46.6% in 4Q19 Realized steel prices increased 4% q/q to $581/t with the increase mainly driven by recovery in global prices for HRC in 4Q19, which had a positive impact on the prices of the domestic market in 1Q20 Coking coal concentrate production rose 13% q/q, driven by the higher demand for concentrate at MMK Sales of finished products in the Turkey steel segment rose 5.1% q/q to 167kt due to expansion and diversification of the product mix on the domestic market The company said the unfavorable pandemic environment globally and the introduction of quarantine measures in Russia create uncertainty in terms of demand for metal products from key consuming industries. As a result, MMK’s management sees risks of declining steel volumes in 2Q20.
Magnitogorsk Iron and Steel Works​ (MMK) has reported mixed 1Q20 earnings: despite stronger EBITDA and FCFE, the BoD decided to postpone the 1Q20 dividend until autumn​, contingent on the post COVID-19 recovery in Russia. We mark-to-market our 2020F forecasts for the company, leaving them unchanged from 2021F onwards. While the negative short-term earnings outlook might pressure the company’s stock performance, MMK continues to offer an attractive 11% 2020F FCFE/DY and trades at an undemanding 4.1x 2020F EV/EBITDA. We reiterate our Buy, based on an unchanged 12-month Target Price of $12 (76% ETR). Better EBITDA on lower SG&A. Despite lower revenues, the company’s EBITDA of $42mn exceeded our and consensus estimates by 4-7% thanks to lower costs. Slab cash costs of $267/t matched our estimates, so we believe that the company was cost efficient on the SG&A side. Defers 1Q20 dividends to 1H20. While FCFE of $115mn (1.8% quarterly yield) was twice what we had expected, the company has decided to skip the 1Q20 dividends, citing a worsening steel market environment due to COVID-19. MMK sees this as a one-off measure and might return to the quarterly dividend payment in autumn 2020, subject to
127​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com