Russian steelmaker MMK’s record year loses shine in last quarter

Posted on 08 February 2019

Source: Reuters

Russian steelmaker MMK’s fourth quarter core earnings fell 9.3 percent year-on-year although it said earnings for 2018 as a whole were up 19 percent to a record $2.4 billion.

“The decrease in revenue for the fourth quarter of 2018 was due to the fall in the average sale price of finished products against a backdrop of a seasonal decrease in sales of steel products,” MMK said in a statement.

Shares in MMK were down 0.08 percent at 0804 GMT after it said fourth quarter earnings before interest, taxation, depreciation and amortisation (EBITDA) fell to $537 million, from $592 million in the fourth quarter of 2017.

The steelmaker also blamed a growing cost of sales quarter-on-quarter, mainly due to higher prices of key raw materials.

Although higher iron ore prices will affect results in the first quarter of 2019, this should be offset by a seasonal recovery in steel prices, it added.

In general, 2019 should bring sufficient demand to maintain high capacity utilisation at MMK facilities, supported by high global steel consumption and restrictions on production in China, the company said.

MMK said its net profit fell 35 percent year-on-year to $245 million, while fourth quarter free cash flow was $239 million.

“Free cash flow beat our expectations by 54 percent… As a result, we anticipate MMK’s dividend yield should beat our expectations and have 3 percent dividend yield,” BCS Global Markets analyst Oleg Petropavlovsky said in a note.

In November the firm, controlled by Russian businessman Viktor Rashnikov, recommended a third-quarter dividend payment of 2.114 roubles per share. It has not yet announced its fourth quarter dividend.

MMK said its capital expenditure in 2018 as a whole was $860 million, meaning major investment projects were being implemented at a faster pace than initially envisaged.

It expects its capex to remain unchanged in 2019.

Source: Reuters (Reporting by Maxim Rodionov and Vladimir Soldatkin; Writing by Polina Ivanova; editing by Jason Neely and Alexander Smith) 

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