Annual Report 2011 - Magnitogorsk Iron & Steel Works ...

2011 /
ANNUAL REPORT
About Us Sales Markets
Finances
Risks
Social Sphere
Management
Information
The change in EBITDA was mainly due to revenue growing at a slower rate than production and
operating costs.
MMK Group Net Income, USD million
2010 2011 Сhange
Operating profit 610 365 (245)
Financial expenses (140) (190) (50)
Financial income 8 15 7
Exchange rate differences (24) (118) (94)
Other income and expenses (164) (213) (49)
Profit (loss) before tax 290 (141) (431)
Income tax (58) 16 74
Profit (loss) for the reporting period 232 (125) (357)
Attributable to minority interests (22) (5) 17
Attributable to shareholders of the parent
company
Analysis of y-o-y Change in MMK Group EBITDA, USD million
3,000
2,500
2,000
1,500
1,000
500
0
1,606
2010
EBITDA
63
MMK's
production
volume
1,229 -919
Price
of MMK's
products
Price
of raw
materials
-539
Other
factors
-48 -55
Change
in Belon's
EBITDA
Change
in EBITDA
of MMK-Metalurji
1,336
2011
EBITDA
254 (120) (374)
The increase in financial expenses was due to borrowed funds raised for business development. Other
costs rose mainly due to an increase in social tax payments.
The negative exchange rate difference of USD 118 million had a significant influence on financial
performance in 2011.
The Company recorded a net loss of USD 125 million for the period, of which USD 120 million was
attributable to shareholders of the parent company.
Steel production
unit of
measure
Thousand
tonnes
Russia steel segment
38 39
2010 2011 Сhange Change (%)
10,253 10,653 400 4 %
Revenue from sales including USD million 7,436 8,914 1,478 20 %
Sales to the Group’s
companies
USD million 11 178 167 в 17 x
Third parties USD million 7,425 8,736 1,311 18 %
EBITDA USD million 1,347 1,187 –160 –12 %
EBITDA margin % 18.1 % 13.3 % –4.8 %
EBITDA per ton of steel
products
USD/t 131 111 –20 –15 %
Capital expenditures USD million 1,451 859 –592
The Group’s financial performance is substantially driven by the Russian steel segment, which includes
OJSC MMK and its steel producing subsidiaries in Magnitogorsk; MMK-METIZ Metalware and Sizing Plant;
the downstream steel processing plants MMK-Profil-Moskva and Intercos-IV; and trading companies.
Thanks to improved market conditions, in 2011 revenue from sales to third parties rose by 18 % year-onyear
to USD 8,736 million.
In 2011, capex in the steel segment was USD 859 million, or 74 % of total investments. Capital
expenditure focused on construction of the cold-rolling complex and other projects at the Magnitogorsk
production site.