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Industrial Metallurgical Holding
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IMH 6M 2017 financial results

23 August 2017

Industrial Metallurgical Holding (IMH), one of the largest global suppliers of merchant pig iron and the biggest Russian merchant coke producer announces 6M 2017 IFRS financial results.

Key financial indicators 

RUB mln

6M 2017

6M 2016

Change, %

Revenue

43 435

28 283

54

COGS

(28 738)

(19 815)

45

Gross profit

14 697

8 468

74

Operating profit

8 230

3 232

155

EBITDA

9 279

4 523

105

   EBITDA margin, %

21

16

-

Adjusted EBITDA

10 602

5 706

86

   Adjusted EBITDA margin, %

24

20

-

Net income

4 314

4 518

(5)

Net cash from operating activities

4 854

4 424

10

Total debt

57 197

48 981

17

Net debt

50 719

48 467

5

In the first half of 2017, consolidated revenues of IMH increased 54% to record-high RUB 43.4 bln compared to RUB 28.3 bln in 6M 2016. Revenue profited from the increase in coal production and the price recovery for IMH’s main products – coal concentrate, coke and pig iron.

Cost of goods sold increased by 45% to RUB 28.7 due to price increase of raw materials purchased from third parties. In addition, COGS reflect wages indexation for all IMH companies.

Operating profit for the period increased by 155% to RUB 8.2 bln compared to 3.2 bln in the first half of 2016.

EBITDA for the reporting period more than doubled and amounted to record-high RUB 9.3 bln, compared with RUB 4.5 billion over the same period last year.

The Group's net income for the first half of 2017 decreased 5% to RUB 4.3 bln from RUB 4.5 bln in the first half of 2016 mainly due to exchange rate difference over the period.

Operational results for 6M 2017

Production, '000 tonnes

6M 2017

6M 2016

Change, %

Coal

1 147

925

24

Coal concentrate

1 259

1 249

1

Coke (6% moisture content)

1 338

1 388

(3)

Iron ore

2 581

2 515

3

Iron ore concentrate

1 130

1 122

1

Pig iron, total

1 163

1 129

3

Key segments financial results

Coal division

RUB mln

6M 2017

6M 2016

Change, %

Segment revenue

9 384

5 819

61

EBITDA

4 552

1 283

255

EBITDA margin, %

49

22

-

IMH Coal division revenue increased by 61% to RUB 9.4 bln compared with RUB 5.8 bln in the first half of 2016 due to market coal price increase and start of coal extraction at the 2nd stage of Butovskaya mine along with the 1st stage of Tikhova mine commissioning.

Coal division consolidated EBITDA increased by 255% to RUB 4.6 bln compared to 1.3 RUB bln in 1H 2016. Division EBITDA margin increased to 49% compared to 22% a year ago.

In 1H 2017 IMH increased total coking coal extraction by 24% to 1.15 mt compared to 0,92 mt in 1H 2016.

Coal concentrate production at Berezovskaya washing plant totaled to 1.26 mt that is 10 kt. higher than in 1H 2016.


Coke division

RUB mln

6M 2017

6M 2016

Change, %

Segment revenue

23 019

12 960

78

EBITDA

3 705

1 647

125

EBITDA margin, %

16

13

-

Coke division revenue upturned by 78% to RUB 23 bln due to global coke price recovery.

EBITDA increased by 125% to RUB 3.7 bln, compared to RUB 1.6 bln in the first half of 2016. EBITDA margin increased 3 ppts to 16%.

Production of 6% moisture content coke at Koks decreased insignificantly compared to the same period of last year and totaled to 1.34 mt.


Ore & Pig iron division

RUB mln

6M 2017

6M 2016

Change, %

Segment revenue

24 210

16 735

45

EBITDA

1 032

1 146

(10)

EBITDA margin, %

4

7

-

Revenue of the Ore & Pig iron division increased by 45% to RUB 24.2 bln compared to the same period last year due to pig iron price recovery in the reporting period.

Division EBITDA downturned by 10% to RUB 1 bln because of the raw material prices outperforming all the way down the production chain compared to pig iron price increase.

Iron ore mining at Korobkovsky deposit in 1H 2017 increased by 3% to 2.58 mt compared to 2.51 mt in 1H 2016. Iron ore concentrate production by KMAruda remained stable at 1.13 mt (+1% y/y).

Tulachermet produced 1.16 mt of pig iron in 1H 2017 that is 3% higher than in 1H 2016.


Sergey Cherkaev, Vice President and CFO of the Industrial Metallurgical Holding, commented on the 6M 2017 financial results:

“The first half of 2017 was marked by record-high financial metrics alongside global and domestic price recovery for the main IMH products after a long decline. During this period we maintained capacity utilization rates close to 100%, increased coking coal output by almost 25%, revenue – by 54%, operating profit – 1.5 times, and more than doubled our EBITDA.

At the end of April 2017 IMH successfully placed a new 5-year USD 500 mln Eurobond at 7.5% coupon rate. The book was oversubscribed 2 times, and this yield became a historical record for the Russian company tapping global capital markets with such credit ratings and maturity. Proceeds were used for the old Eurobond issue repayment and radical debt portfolio optimization. Maturity profile was extended in such a way that now our total long-term available credit facilities (4 to 7 year-long) exceed IMH’s current debt.

Our consistent and constructive work with banks led to an overall decrease in the average cost of debt. Simultaneously, the share of secured loans was reduced significantly and we will continue to work on its further reduction. Current debt portfolio structure has been changed in such a way that for the next year and a half we do not have significant payments until December 28, 2018, when the remaining part of the old Eurobond issue will be repaid.

Within our financial strategy, we continue to reduce the Group's overall debt burden. If the Net Debt / EBITDA ratio at the end of 2016 was at the level of 3.3, it was reduced to 2.7 during the reporting period. Our aim is to reduce this ratio below 2.0, which we intend to focus on in the nearest future. In general, our work in the first half of 2017 allowed us to resolve the issue with company’s liquidity, which was noted by international rating agencies, who upgraded IMH’s ratings and outlooks”.

Full IFRS Interim Condensed Consolidated Financial Information (unaudited) For the six months ended 30 June 2017 is available at: http://www.kemkoks.ru/_upload/docs_lang/filename_document1_7386.pdf

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