OREANDA-NEWS. January 31, 2012. MMK trading update for Q4 and FY 2011

MMK Group operating highlights

Production, thousand tonnes

 

FY 2011

FY 2010

%

Q4 2011

Q3 2011

%

MMK Group crude steel

12,195

11,419

7%

3,109

3,182

-2%

MMK

11,724

11 419

3%

2,826

3,015

-6%

MMK Metalurji

471

-

-

283

167

69%

MMK Group steel products

11,158

10,409

7%

2,859

2,951

-3%

MMK

10,646

10,245

4%

2,623

2,789

-6%

MMK-Metiz

465

450

3%

103

126

-18%

MMK-Metalurji

505

156

224%

233

160

46%

HVA products, MMK Group (volume)

4,066

3,968

2%

1,028

990

4%

HVA products, MMK Group (% of total production)

36%

38%

 

36%

34%

 

Belon coal concentrate

3,216

2,960

9%

882

849

4%

Iron ore

4,825

4,680

3%

1,145

1,224

-6%

MMK Group's total crude steel output in 2011 was 12,195 thousand tonnes (+7% y-o-y)

MMK Group's total finished steel products output in 2011 was 11,158 thousand tonnes (+7% y-o-y)

MMK's total crude steel output in 2011 was 11,724 thousand tonnes (+3% y-o-y). MMK produced 2,826 thousand tonnes of crude steel in Q4 2011.

MMK's total finished steel products output in 2011 was 10,646 thousand tonnes (+4% y-o-y). MMK produced 2,623 thousand tonnes of finished steel products in Q4 2011.

MMK-Metiz's total finished steel products output in 2011 was 465 thousand tonnes (+3% y-o-y). MMK-Metiz produced 103 thousand tonnes of finished steel products in Q4 2011.

MMK-Metalurji's total finished steel products output in 2011 was 505 thousand tonnes, a increase of 3.2x y-o- y. MMK-Metalurji produced 233 thousand tonnes of finished steel products in Q4 2011 (+46% q-o-q).

MMK Group's total output of high value-added (HVA) products increased 2% y-o-y in 2011 to 4,066 th tonnes.

Production of coking coal concentrate in 2011 was 3,216 thousand tonnes (+9% y-o-y). Production of coking coal concentrate in Q4 2011 was 882 thousand tonnes (+4% q-o-q).

Consumption of own iron ore was 4,825 thousand tonnes (+3% y-o-y).

Steel segment

MMK

Production, thousand tonnes

Production

FY 2011

FY 2010

%

Q4 2011

Q3 2011

%

Cast iron

9,496

9,234

3%

2,277

2,440

-7%

Crude steel

11,724

11,419

3%

2,826

3,015

-6%

Finished products, of which:

10,646

10,245

4%

2,623

2,789

-6%

Slabs and billets

157

209

-25%

102

0

-

Long products

1,499

1,065

41%

372

479

-22%

Flat hot-rolled products

5,708

5,524

3%

1,343

1,546

-13%

HVA products, of which:

3,283

3,448

-5%

807

764

6%

Thick plate (mill 5000)

899

943

-5%

171

178

-4%

Flat cold-rolled products

1,027

1,116

-9%

302

245

23%

Downstream products, of which:

1,357

1,388

-2%

334

341

-2%

Tin plate

134

208

-36%

29

28

1%

Galvanised steel

493

597

-17%

129

113

14%

Colour-coated steel

255

203

25%

59

80

-26%

Band

98

116

-16%

27

21

30%

Formed section

259

187

38%

56

61

-9%

Pipes

49

75

-35%

10

13

-23%

Structural steel MMK Profile Moscow

69

-

-

24

24

2%

Shipments by market

 

 

 

 

 

 

Domestic*

7,181

7,044

2%

1,673

1,943

-14%

Export

3,465

3,201

8%

950

846

12%

Average prices, finished products (USD)

 

FY 2011

FY 2010

%

Q4 2011

Q3 2011

%

Average price per ton:

 

 

 

 

 

 

Slabs and billets

524

452

16%

483

-

-

Long products

687

595

15%

654

699

-6%

Flat hot-rolled products

653

535

22%

610

655

-7%

HVA products, of which:

981

793

24%

905

1,011

-11%

Thick plate (mill 5000)

1,061

869

22%

888

1,021

-13%

Flat cold-rolled products

787

621

27%

761

805

-5%

Downstream products, of which:

1,074

882

22%

1,043

1,155

-10%

Tin plate

1,134

960

18%

1,079

1,197

-10%

Galvanised steel

1,028

841

22%

1,022

1,099

-7%

Colour-coated steel

1,273

1,190

7%

1,229

1,357

-9%

Band

1,008

778

30%

930

1,022

-9%

Formed section

970

735

32%

934

1,005

-7%

Pipes

845

671

26%

789

877

-10%

Structural steel MMK Profile Moscow

1,247

955

31%

1,295

1,348

-4%

Average price per ton, of which:

757

627

21%

702

760

-8%

Domestic*

836

686

22%

783

829

-6%

Export

593

497

19%

558

601

-7%

*including CIS

2011 finished steel products output was 10,646 thousand tonnes (+4% y-o-y). Sales to the higher priority domestic market increased by 2% and their share amounted to 67% of total shipments in 2011.

Production of finished slab in 2011 declined by 25% y-o-y to 157 thousand tonnes.

Long product shipments grew by 41% y-o-y in 2011. The increase was due to the general recovery in the construction sector in 2011. Shipments of long products fell by 22% q-o-q on Q4 2011 due to the seasonal reduction in demand for long products.

Production of flat hot-rolled products in 2011 was 5,708 thousand tonnes, 3% higher y-o-y. Growth was due to generally higher export sales, most of which is attributable to hot-rolled products.

Total mill 5000 thick plate production in 2011 was 899 thousand tonnes, to some extent lower y-o-y. This was due to a reduction in orders from pipe companies for rolled products for large-diameter pipes. Average price for mill 5000 plate in 2011 grew by 22% y-o-y.

 Output of galvanised steel in 2011 declined by 17% y-o-y. This was due to a 25% increase in production of more expensive colour-coated steel in the same period. In 2011 galvanised steel was also shipped as a rolled product to MMK Profile Moscow, which makes structural steel products.

Output of formed section increased by 38% in 2011 y-o-y to 259 thousand tonnes. This was due to significant growth in demand from railcar makers undertaking fleet renewal programmes.

The average price per ton of finished steel product from MMK in 2011 was USD 757, a 21% increase y-o-y. This was due to higher demand for steel in H1 11 coming from major steel-consuming industries (auto making, construction sector, pipe making).

MMK-Metiz

Production, thousand tonnes

Production

FY 2011

FY 2010

%

Q4 2011

Q3 2011

%

Finished products, of which:

465

450

3%

103

126

-18%

MMK output

458

442

4%

100

124

-20%

MMK-Metiz's total finished steel products output in 2011 was 465 thousand tonnes (+3% y-o-y)

Production of finished products in Q4 2011 was 103 thousand tonnes, 18% down q-o-q. This was due to a seasonal slowdown in business activity in major consumer sectors for MMK-Metiz's products (construction and metallurgy).

MMK Metalurji

Production, thousand tonnes

Production

FY 2011

FY 2010

%

Q4 2011

Q3 2011

%

Crude steel

470

-

-

283

167

69%

MMK-Metalurji finished products output, of which:

505

156

224%

233

160

45%

Flat hot-rolled products

187

86

117%

115

60

92%

HVA products, of which:

318

70

356%

118

100

18%

Galvanised steel

195

32

511%

77

57

36%

Colour-coated steel

123

38

225%

40

43

-6%

Output of finished products at MMK's Turkish operations in 2011 was 505 thousand tonnes, more than 3 times higher than FY10.

In 2011 equipment commissioning process took place. Ramping up the main production facility to full capacity (2.3 million tonnes of finished products per year) is planned for H1 12.

Mining segment

COAL Belon

Production, thousand tonnes

Production

FY 2011

FY 2010

%

Q4 2011

Q3 2011

%

Coking coal

5,225

4,644

13%

1,474

1,235

19%

Mined

4,160

4,207

-1%

1,168

1,004

16%

Purchased

1,065

437

144%

306

231

32%

Coking coal concentrate

3,216

2,960

9%

882

849

4%

Minor y-o-y decline in production of mined coking coal (-1%) in 2011 was due to large-scale reconstruction of walls during Q1, Q2 and beginning of Q3 of 2011. However, the resultant decline in production volumes during this period was largely compensated by higher output in Q3 and Q4 of 2011.

Output of mined coking coal in Q4 2011 rose by 16% y-o-y to 1,168 thousand tonnes.

Production of coking coal concentrate in Q4 2011 was 882 thousand tonnes, up 4% q-o-q.

RON ORE

Production, thousand tonnes

Production

FY 2011

FY 2010

%

Q4 2011

Q3 2011

%

Iron ore (used at MMK), of which:

4,825

4,679

3%

1,145

1,224

-6%

Bakal

832

1,421

-41%

137

190

-28%

Magnitogorsk

1,976

1,491

33%

580

560

4%

Slag processing

2,017

1,767

14%

428

474

-10%

* from end-Q211 shipments from the Sosnovsky deposit are included in shipments from the Magnitogorsk iron-ore base.

Consumption of captive iron ore in 2011 increased by 3% y-o-y to 4,825 thousand tonnes.

MMK's consumption of iron ore from its Bakal subsidiary in 2011 totalled 832 thousand tonnes, 41% lower than in FY10. This was due to lower shipments of iron ore after transfer of the Sosnovsky deposit from the Bakal subsidiary. Shipments from this deposit were subsequently included in shipments from the Magnitogorsk iron ore base.

Consumption of iron ore from the Magnitogorsk base in 2011 was 1,976 thousand tonnes, an increase of 33% y-o-y. This growth was due to increased concentrate production at crushing and beneficiation plant no. 5, and also to the inclusion of the Sosnovsky deposit in deliveries from the Magnitogorsk iron-ore base.

Slag processing volumes in 2011 increased by 14% y-o-y to 2,017 thousand tonnes. This was due to the upgrades to the Amcom-1 processing facility in late 2010 and the launch of the Amcom-2 and Amcom-3 facilities, leading to higher processing of tailings.

Update on MMK Group's key investment projects Mill 2000

MMK is building a new production facility to benefit from growing demand for high-strength steels, and to substitute imports of high-quality automotive plate. The facility will use cutting-edge technologies to produce high- quality cold-rolled and galvanised products for use in internal and external car parts as well as for white goods and the construction industry The facility is expected to have a capacity of 2 million tonnes of finished products per year, including 700 thousand tonnes of galvanised steel.

The first stage of Mill 2000, including a continuous pickling line coupled with a tandem mill, was commissioned on July 15, 2011.

The facility is currently in the process of ramping up to full production capacity. In 2011, the mill produced 370 thousand tonnes of cold-rolled product. The mill continues to supply carmakers.

The second stage of the complex, which will include a continuous hot-dip galvanizing unit, a continuous annealing unit and a coil inspection unit, is to be commissioned in July 2012.

The Mill 2000 complex was supplied by the German metallurgy machinery company SMS-DEMAG. MMK-Metalurji

In order to strengthen its footprint in Middle Eastern markets, MMK constructed the MMK Metalurji steel production complex in Turkey.

The continuous hot-dip galvanizing unit at the MMK Metalurji Istanbul site was commissioned on July 15, 2011. This marks completion of construction of the MMK Metalurji metallurgy complex, which is located at two sites: in Iskenderun and Istanbul. Construction of the Iskenderun facility was completed in May 2011.

The annual production capacity of MMK Metalurji is 2.3 mln tonnes of finished steel products: hot-rolled coils, galvanised coils and colour-coated coils.

The advanced production technology installed at MMK Metalurji makes the plant one of the most advanced in Turkey. This new facility will meet growing Turkish demand for a range of metal products and enable MMK to export products to the Middle East, Mediterranean region and Europe.

Outlook

It is expected that steel consumption in Russia will grow in 2012 faster than in the world at average. Steel consumption growth, realised investments in equipment modernisation and mastering of new products will help MMK to increase production of finished products in 2012 at its Russian facilities. General MMK Group output growth of finished steel products in 2012 may reach 15% among other due to ramp-up to full production capacity at the company's facilities in Turkey.

MMK plans to publish its consolidated IFRS financial results for Q4 2011 and 2011 in early April 2012.