Russian steelmaker MMK cautious after strong quarter, delays Turkey project

MOSCOW, Nov 2 – Russian steelmaker MMK reported its strongest quarter in a decade on Friday but it postponed the relaunch of steel production in Turkey and warned that falling prices could hit profits in its final quarter.

The relaunch of hot-rolled steel production at its Turkish site was delayed earlier this year due to rising trade tensions and a surge in protectionist measures.

MMK's third-quarter earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 26 percent to $671 million, the highest since at least 2008, beating forecasts of $638 million in a Reuters poll. Revenue rose 3.9 percent to $2.09 billion.

While MMK said it sees stable demand for steel products in its markets, supported by growth in global steel consumption and a programme to reduce production capacity in China, it also warned that global steel prices could put pressure on results.

"The company's financial results for (the fourth quarter) will be affected by the decrease in global steel prices and seasonal correction in the domestic market, against a backdrop of stabilising prices for key raw materials," MMK said in its statement.

MMK had intended to decide the fate of the Metalurji complex in Turkey in November but has put back the decision until mid-2019, Andrey Eremin, MMK director for economics, said on a conference call.

"We actually made a decision to postpone the launch of steel-making part of Turkish business, and the main reason for this is that volatility of the potential profitability (in the steel sector)…is unpredictably high," Eremin said.

Analysts also noted that MMK's 2018 capital expenditure was expected to exceed the previously planned $800 million due to an acceleration of its investment programme.

The firm, controlled by Russian businessman Viktor Rashnikov, recommended a third-quarter dividend payment of 2.114 roubles per share.

(By Polina Ivanova, Diana Asonova, Tom Balmforth and Polina Devitt; Editing by Susan Fenton and Elaine Hardcastle)