Magnitogorsk Iron & Steel Works Net Income surged on 165% in 2016 and EBITDA Margin increased on 6.2 pp from 28.3% to 34.5%
15 Feb 2017 • About Magnitogorsk Iron & Steel Works (
$MMK) • By InTwits
Magnitogorsk Iron & Steel Works reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Magnitogorsk Iron & Steel Works is a company in decline: 2016 revenue growth was -3.6%, 5 years revenue CAGR was -9.6%
- EBITDA Margin is expanding: 34.5% in 2016 vs. 28.3% in 2015 vs. 13.1% in 2012
- EBITDA Margin is quite volatile: 34.5% in 2016, 28.3% in 2015, 19.5% in 2014, 14.0% in 2013, 13.1% in 2012
- Magnitogorsk Iron & Steel Works has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.1%. At the same time it's a lot of higher than industry average of 2.5%.
- CAPEX is quite volatile: 494 in 2016, 412 in 2015, 700 in 2014, 968 in 2013, 1,336 in 2012
- The company has highly profitable business model: ROIC is at 26.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Magnitogorsk Iron & Steel Works ($MMK) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 9,328 | 8,190 | 7,952 | 5,839 | 5,630 | -3.6% |
| Gross Profit | 1,447 | 1,223 | 1,740 | 1,785 | 1,813 | 1.6% |
| SG&A | 1,092 | 1,111 | 891 | 652 | 632 | -3.1% |
| EBITDA | 1,225 | 1,143 | 1,549 | 1,651 | 1,941 | 17.6% |
| Net Income | -84 | -2,400 | -43 | 420 | 1,111 | 164.5% |
Balance Sheet
|
|---|
| Cash | 362 | 154 | 327 | 369 | 266 | -27.9% |
| Short Term Debt | 1,631 | 1,010 | 863 | 893 | 321 | -64.1% |
| Long Term Debt | 2,236 | 2,163 | 1,722 | 954 | 179 | -81.2% |
Cash flow
|
|---|
| Capex | 674 | 622 | 497 | 348 | 463 | 33.0% |
Ratios
|
|---|
| Revenue growth | 0.2% | -12.2% | -2.9% | -26.6% | -3.6% | |
| EBITDA growth | -2.2% | -6.7% | 35.5% | 6.6% | 17.6% | |
| Gross Margin | 15.5% | 14.9% | 21.9% | 30.6% | 32.2% | 1.6% |
| EBITDA Margin | 13.1% | 14.0% | 19.5% | 28.3% | 34.5% | 6.2% |
| Net Income Margin | -0.9% | -29.3% | -0.5% | 7.2% | 19.7% | 12.5% |
| SG&A, % of revenue | 11.7% | 13.6% | 11.2% | 11.2% | 11.2% | 0.1% |
| CAPEX, % of revenue | 7.2% | 7.6% | 6.3% | 6.0% | 8.2% | 2.3% |
| ROIC | 1.8% | 1.4% | 9.1% | 18.1% | 26.7% | 8.6% |
| ROE | -0.9% | -29.1% | -0.8% | 11.6% | 27.8% | 16.1% |
| Net Debt/EBITDA | 2.9x | 2.6x | 1.5x | 0.9x | 0.1x | -0.8x |
Revenue and profitability
Magnitogorsk Iron & Steel Works's Revenue decreased on 3.6% in 2016. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 6.2 pp from 28.3% to 34.5% in 2016.
Gross Margin increased slightly on 1.6 pp from 30.6% to 32.2% in 2016. SG&A as a % of Revenue showed almost no change in 2016.
Net Income marign jumped on 12.5 pp from 7.2% to 19.7% in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 Magnitogorsk Iron & Steel Works had CAPEX/Revenue of 8.2%. CAPEX/Revenue increased slightly on 0.63 pp from 7.6% in 2013 to 8.2% in 2016. Average CAPEX/Revenue for the last three years was 6.8%.
Return on investment
The company operates at high and attractive ROIC (26.65%) and ROE (27.78%). ROIC increased on 8.6 pp from 18.1% to 26.7% in 2016. ROE surged on 16.1 pp from 11.6% to 27.8% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.1x and Debt / EBITDA is 0.3x. Net Debt / EBITDA dropped on 0.8x from 0.9x to 0.1x in 2016. Debt dropped on 72.9% in 2016 while cash dropped on 27.9% in 2016.
Valuation
Magnitogorsk Iron & Steel Works's trades at EV/EBITDA 0.2x and P/E 0.1x while industy averages are 15.6x and 19.1x. Magnitogorsk Iron & Steel Works's EV/(EBITDA-CAPEX) is 0.2x with the industry average at 19.0x.
Appendix 1: Peers in Industrial Metals & Mining
Below you can find Magnitogorsk Iron & Steel Works benchmarking vs. other companies in Industrial Metals & Mining industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Base Resources Ltd ($BSE) | | | | 399.7% | 16.2% |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 2.4% | -0.1% | 26.4% | 45.5% | |
| Norsk Hydro Asa ($NHY) | | 1.1% | 20.1% | 12.6% | -6.5% |
| Afarak Group ($AFRK) | -19.2% | 5.4% | 27.4% | 8.7% | |
| Vimetco Nv ($VICO) | -13.4% | -6.5% | -12.8% | -5.3% | |
| |
|---|
| Median (15 companies) | -1.0% | 0.3% | 2.4% | -10.6% | -7.0% |
|---|
| Magnitogorsk Iron & Steel Works ($MMK) | | -12.2% | -2.9% | -26.6% | -3.6% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mmc Norilsk Nickel ($MNOD) | 49.1% | 43.4% | 52.2% | 55.7% | |
| Severstal PJSC ($SVST) | 23.5% | 29.9% | 34.4% | 40.4% | 39.6% |
| Novolipetsk Iron And Steel Corp ($NLMK) | 23.8% | 19.4% | 28.3% | 31.4% | |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 17.7% | 15.1% | 28.6% | 24.8% | |
| Base Resources Ltd ($BSE) | | | 11.8% | 21.2% | 21.0% |
| |
|---|
| Median (13 companies) | 15.9% | 15.1% | 18.0% | 13.5% | 12.6% |
|---|
| Magnitogorsk Iron & Steel Works ($MMK) | 15.5% | 14.9% | 21.9% | 30.6% | 32.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mmc Norilsk Nickel ($MNOD) | 38.6% | 29.2% | 46.8% | 47.0% | |
| Base Resources Ltd ($BSE) | | | -1.8% | 37.7% | 35.8% |
| Severstal PJSC ($SVST) | 14.9% | 19.3% | 26.4% | 32.4% | 31.2% |
| Novolipetsk Iron And Steel Corp ($NLMK) | 15.6% | 13.8% | 21.8% | 24.3% | |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 12.7% | 5.7% | 25.3% | 24.1% | |
| |
|---|
| Median (15 companies) | 13.1% | 12.1% | 12.6% | 14.6% | 16.0% |
|---|
| Magnitogorsk Iron & Steel Works ($MMK) | 13.1% | 14.0% | 19.5% | 28.3% | 34.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| First Quantum Minerals ($FQM) | 46.5% | 73.2% | 81.7% | 72.5% | |
| Mmc Norilsk Nickel ($MNOD) | 22.3% | 17.1% | 10.8% | 19.0% | |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 7.0% | 7.9% | 9.9% | 8.1% | |
| Novolipetsk Iron And Steel Corp ($NLMK) | 12.0% | 6.9% | 5.4% | 7.7% | |
| Ezz Steel ($AEZD) | 2.3% | 3.9% | 6.4% | 6.8% | |
| |
|---|
| Median (15 companies) | 6.7% | 7.7% | 6.4% | 6.3% | 6.4% |
|---|
| Magnitogorsk Iron & Steel Works ($MMK) | 7.2% | 7.6% | 6.3% | 6.0% | 8.2% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mmc Norilsk Nickel ($MNOD) | 21.8% | 14.2% | 34.1% | 31.7% | |
| Severstal PJSC ($SVST) | 10.3% | 9.6% | 17.7% | 30.3% | 29.7% |
| Zibao Metals Recycling Hldgs Ltd ($ZBO) | 41.7% | 56.6% | 55.8% | 26.6% | 0.9% |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 6.2% | -2.7% | 25.6% | 24.4% | |
| Novolipetsk Iron And Steel Corp ($NLMK) | 7.2% | 4.1% | 12.0% | 15.7% | |
| |
|---|
| Median (15 companies) | 6.2% | 4.9% | 7.4% | 5.6% | 4.5% |
|---|
| Magnitogorsk Iron & Steel Works ($MMK) | 1.8% | 1.4% | 9.1% | 18.1% | 26.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Vimetco Nv ($VICO) | 7.7x | | 10.9x | 14.6x | |
| Ezz Steel ($AEZD) | 4.8x | 3.6x | 19.4x | 13.3x | |
| First Quantum Minerals ($FQM) | 0.0x | 2.5x | 4.0x | 10.5x | |
| Base Resources Ltd ($BSE) | | | | 4.4x | 3.7x |
| OAO TMK ($TMKS) | 3.6x | 3.9x | 3.8x | 4.3x | |
| |
|---|
| Median (14 companies) | 1.9x | 2.0x | 0.8x | 1.1x | 0.2x |
|---|
| Magnitogorsk Iron & Steel Works ($MMK) | 2.9x | 2.6x | 1.5x | 0.9x | 0.1x |
