MMK announces profit in Q1 2015

The largest steel producer in Russia, Magnitogorsk Iron and Steel Works (MMK), reported a net profit of $ 196 million for the 1st quarter of 2015, based on financial results presented in accordance with IFRS. In a statement, the company noted that a year earlier, the first quarter ended with a net loss of $ 79 million. The company's revenue for the 1st quarter of 2015 decreased by 19.6 percent to $ 1.87 million compared to the 1st quarter of 2014. The drop in revenue in the year-on-year comparison is mainly due to the devaluation of the ruble at the end of 2014 and the fall in steel prices on export markets.

Sales costs for Q1 2015 reached $ 1 billion, down 33.4 percent from Q1 2014. This decrease was made possible thanks to the implementation of measures aimed at optimizing costs and a favorable situation in the commodity markets. General, administrative and selling expenses for Q1 2015 were $ 149 million, down 45.2 percent from Q1 2014. Due to the outstripping rates of decline in cost versus income, in the 1st quarter of 2015, operating income soared by 341.0 percent to $ 344 million compared to the 1st quarter of 2014.

EBITDA increased by 59.9 percent to $ 470 million, and EBITDA margin increased to 31.1 percent in Q1 2015 from 15.5 percent in Q1 2014. This EBITDA level is a record for the company over the past five years. MMK's free cash flow in Q1 2015 amounted to $ 190 million, which is 475.8 percent more than in the first quarter a year earlier.

Nevertheless, the company expects a slight decrease in results in the 2nd quarter compared to the first, as metal traders are more actively replenishing stocks at the beginning of the year. However, he hopes that this will not affect the financial results in connection with the implementation of the operational efficiency improvement program and the favorable environment in the commodity markets.