MMK Magnitogorsk Iron and Steel Works

PJSC Magnitogorsk Iron and Steel Works (formerly OJSC) is one of the world's largest steel producers and occupies a leading position among iron and steel enterprises in Russia. The company's assets in Russia are a large metallurgical complex with a full production cycle, from the preparation of iron ore raw materials to deep processing of ferrous metals.

MMK produces a wide range of metal products with a predominant share of products with high added value: high-strength, flat rolled products, metal products for the automotive industry, coated, long, bent and shaped rolled products.

MMK is implementing the MMK - Atakas project in the Republic of Turkey for the production of 2.3 million tons of flat steel.

Performance indicators

• $6.395 billion in 2020 revenue $1.492 billion EBITDA
• 11.574 million tons of smelted steel in 2020
• 10.7 million tons of metal products sold in 2020

Illustration: rusmet.ru

• MMK Group revenue for 2018 amounted to $8.214 billion, EBITDA - $2.418 billion
• In 2009, the mill produced 9.6 million tons of steel and 8.8 million tons of commercial metal products. MMK Group's revenue for 2009 amounted to $5.081 billion, EBITDA - $1.285 billion, profit for the period - $219 million.

2023

Net profit growth by 68.2% to RUB 118.36 billion

Magnitogorsk Iron and Steel Works (MMK) completed 2023 with a net profit of 118.36 billion rubles recorded at the end of this period, which is 68.2% more than a year ago. The company's revenue in comparison with these periods increased by 9.1% and reached 763.39 billion rubles. Such data are provided in the reporting of MMK according to international financial standards (IFRS), which was published on February 7, 2024.

According to MMK, due to an improvement in the sales structure, including an increase in the share of premium products, EBITDA in 2023 increased by 26.2% compared to the previous year, to 195.59 billion rubles. EBITDA margin reached 25.6%. Free cash flow for the year decreased by 57.6% and amounted to 30.75 billion rubles, which, as explained in the company, was the result of an increase in capital expenditures.

𝓲

Pexels

Capital investments (capex) of the group for 2023 amounted to 94.86 billion rubles, an increase of 26.4% compared to 2022, which is due to the ongoing implementation of MMK's development strategy. The ratio of net working capital to revenue at the end of 2023 is at a comfortable level for the company and amounted to 12.7%, which reflects the effective work of management with working capital, MMK noted.

The plant explains the growth of capex by the "ongoing implementation of the group's development strategy": reaching the final stage of the construction of coke battery No. 12, the ongoing construction of an oxygen block, and the construction of a hot-rolled sheet heat treatment complex. Chairman of the Board of Directors of MMK Viktor Rashnikov estimated the investment program of the Magnitogorsk Metallurgical Plant in 2023 at about 50 billion rubles.

The increase in revenue in the group was attributed to "improved sales structure," including an increase in sales of premium products.

Consolidated Financial Statements for the year ended December 31, 2023

11.1% increase in steel production to 12.9 million tons

In 2023, steel production at the Magnitogorsk Metallurgical Plant (MMK) increased by 11.1% compared to 2022 and reached 12.9 million tons. The press service of the enterprise noted that this reflects the favorable situation in the Russian rolled metal market. Such data are contained in the report, which MMK published at the end of January 2024.

It follows from the document that in 2023 at the site in Magnitogorsk, steel production increased by 16.8% - to 12.6 million tons, and at the Turkish asset decreased by 57.4% - to 381 thousand tons due to the difficult macroeconomic situation.

Iron smelting at MMK increased by 9.5% to 9.9 million tonnes. The indicator is associated with a decrease in the duration of repair work in the blast furnace production. Sales of metal products in 2023 in comparison with 2022 increased by 10.1% - to 11.7 million tons. This, according to the company, is due to high demand from the automotive engineering industry, construction activity and expanding sales to neighboring countries.

Sales of premium products increased by 7.1% - to 5 million tons. Coal concentrate production decreased slightly compared to last year, to 3.4 million tons. Iron ore production in 2023 decreased by 3.8% compared to a year ago, to 563 thousand tons.

According to MMK forecasts, in the first quarter of 2024, sales indicators will be influenced by a seasonal slowdown in construction activity in the domestic market, as well as buyers' reduction in metal stocks due to a key rate increase. Demand for metal products is expected to recover by the end of the first quarter - the beginning of the second quarter of 2024 against the background of buyers replenishing stocks of metal products and seasonal rise in construction activity.

MMK Operating results

2021: Revenue - $11.87 billion, profit - $3.1 billion

Magnitogorsk Iron and Steel Works (MMK) completed 2021 with revenue of $11.87 billion received following this 12-month period. Compared to 2020, sales increased by 85.6%, reflecting an increase in sales volumes, partially offset by a correction in world steel prices. The group released such data on February 28, 2022.

MMK's net profit in 2021 was $3.1 billion, an increase of 5.2 times compared to profit a year ago, "reflecting the growth in production volumes and sales efficiency against the background of positive trends in global markets," the press release said.

EBITDA more than doubled compared to 2020 to $4.2 billion. EBITDA margin reached 36.1%, an increase of 12.8 pp. Free cash flow at the end of 2021 amounted to $1.62 billion.

According to MMK, the output of the 2500 mill at full capacity in 2021 allowed to increase sales of hot-rolled (g/k) rolled products by 37% compared to 2020, which was also reflected in the geographical and product structure of sales. Thus, the share of sales in the domestic market (Russia and the CIS) amounted to 72%, having decreased by 9 percentage points against the background of the restoration of traditional sales volumes of rolled products to export markets. At the same time, despite the growth in sales of premium products in absolute terms, the share of such products in the sales structure in 2021 amounted to 42%, having decreased by 7.5 percentage points compared to 2020, against the background of an increase in production of rolled products.

In 2021, MMK's revenue in the steel segment reached $11.1 billion (in Turkey, the figure was $1.18 billion, an increase of 128.6%), which is almost 86% higher than a year ago. In the coal mining segment, sales increased by 148.6%, to $445 million.^[1]

2018

• MMK Group produced 12.7 million tons of steel and 11.6 million tons of commercial metal products.
• MMK Group's revenue for 2018 amounted to $8.214 billion, EBITDA - $2.418 billion.

Digitalization

Astra Linux Implementation

Main article: Astra Linux implementation

2024

MMK was the first in Russia to create a digital double of an entire company

Magnitogorsk Iron and Steel Works (MMK) became the first company in Russia to create a digital twin for an entire company. The new project was implemented as part of the introduction of business process analytics using Task Mining technology, the MMK press service reported on November 12, 2024. Read more here.

Digitalization budget - 800 million rubles

On October 14, 2024, the Magnitogorsk Iron and Steel Works (MMK) announced the allocation of ₽800 million for the introduction of modern technologies as part of its digitalization strategy for 2024. The company expects that the economic effect of using high-tech solutions in 2024 will be ₽1,9 billion.

According to the press service of the Magnitogorsk Metallurgical Plant, digital transformation is considered by management as a key element in improving business efficiency. MMK's digitalization strategy assumes maximum coverage of all key business areas and includes the use of advanced technological solutions in the field of artificial intelligence, robotization, big data, the industrial Internet of Things and virtual reality.

𝓲

Freepik

MMK CEO Pavel Shilyaev emphasized the practical nature of the digitalization strategy, noting that it is based on a comprehensive assessment of the needs of business and customers. The company focuses on the potential effects of implementing this strategy.

In 2024, the IT division of MMK (MMK-Informservice) planned the implementation of 10 digital projects in various areas. By October 2024, seven of these projects had already been worked out and implemented. This is a continuation of a large-scale digitalization program: since 2020, the company has implemented 92 digital solutions.

MMK's digitalization strategy is part of a broader trend in the metallurgical industry aimed at improving production efficiency and competitiveness through the introduction of modern technologies. Investment in digital technology allows the company to optimize production processes, reduce costs and improve product quality.

The expected economic effect, more than twice the investment, demonstrates the high efficiency of the chosen digitalization strategy. This can serve as an example for other metallurgical enterprises seeking to improve their efficiency in the face of growing global competition.^[2]

Allocation for digitalization to improve product quality

Magnitogorsk Iron and Steel Works (MMK) in September 2024 announced the allocation of ₽3 billion for targeted projects to improve the quality of products mainly using digital technologies. Within the framework of the approved program of measures for 2024-2026, the plant intends to invest ₽1 billion annually in projects aimed at improving the quality of manufactured metal products and stabilizing technological processes at the enterprise.

According to the press service of MMK, the program will cover the key workshops of the steelmaking and rolling redistributions of the enterprise. Targeted investment projects involve the modernization of equipment and maintaining its operability. Particular attention is paid to digital solutions for quality monitoring. One of the most significant projects will be Digital Quality Analysis, which is planned to be implemented from 2024 to 2028. It involves the creation of a corporate online platform that tracks production technology and the provision of services to consumers. The new functionality will allow you to automatically calculate key performance metrics and exclude the human factor during quality control and product certification.

𝓲

Unsplash

Among the initiatives already implemented in this area is the introduction of a system of dynamic management of technological risks. According to MMK, this system detects non-stationary operating modes and special production situations with violations of technological parameters. In case of high risk of obtaining products of inadequate quality, the system automatically notifies specialists and generates an interactive technical chart to adjust the technological process. This approach is based on predictive analytics and adaptive control systems. The project has already been successfully implemented in all the main production streams of the enterprise - from oxygen converter and electric furnace shops to hot and cold rolling, as well as the production of coated metal.^[3]

Spending 2.9 billion rubles on digitalization for 3 years

Magnitogorsk Iron and Steel Works (MMK) has invested 2.9 billion rubles in digitalization over the past three years. This became known on July 2, 2024.

According to Andrey Eremin, Economics Director of MMK PJSC, the plant is introducing new digital technologies in all areas of its activities. This makes it possible to achieve significant economic, environmental and labor effects. As part of the digitalization strategy, 105 digital initiatives were worked out, of which 72 projects have already been implemented.

𝓲

Freepik

The greatest effect (64%) is provided by projects implemented at the production site, especially in aglocoxodomain production. Machine vision and artificial intelligence technologies are used here to optimize processes. As Andrei Eremin noted, an example is the Optimal Cast Iron system, which minimizes the cost of pig iron production, at the stage of which up to 80% of metallurgical production costs are formed.

Software robotization has also made a significant contribution to efficiency. Over the past three years, the economic effect of the introduction of software robots has amounted to about 650 million rubles, which is 26% of the total economic effect of all digital projects. The MMK group has 288 business processes robotic, and this work continues. Eremin stressed that the cumulative effect of the introduction of robots is growing every year, since the cost of maintaining the system is minimal after its initial implementation.

Director of MMK-Informservice LLC Vadim Feoktistov noted that software robotization is a key element of the plant's digitalization strategy. New technologies, such as Process Mining and Task Mining, complement software robotization, allowing you to analyze and optimize business processes, excluding human participation.^[4]

2020: MMK approves new IT development strategy

The new strategy, developed by PJSC Magnitogorsk Iron and Steel Works together with Deloitte Consulting LLC, covers the period until 2025.

The need to update the IT strategy arose after the adoption of a new digitalization strategy for the company in 2019, since all MMK digitalization projects, without exception, contain an IT component.

The IT strategy of MMK PJSC - 2025 includes the implementation of 27 strategic initiatives, including: unification of platforms and solutions of basic automation; Apply cloud solutions to relevant system classes unification of the MES platform for production automation; Support and develop IT infrastructure to meet the growing demands of IT solutions and business users Improve IT infrastructure disaster tolerance development of information security facilities; regular updating of needs and coordination with the Digital Office to support the implementation of MMK's Digitalization Strategy; adaptation of the IT management operating model to the implementation of the objectives of the updated IT Strategy 2025.

The implementation of the strategy will allow PJSC MMK to achieve the required target state of information technologies, which will meet business needs and time requirements.

2019: Launch of digitalization program, in which 5 billion rubles will be invested

At the end of December 2019, the Magnitogorsk Iron and Steel Works (MMK) announced the launch of a digitalization program developed jointly with Deloitte. It is planned to spend 5 billion rubles on digital projects from 2020 to 2024, or 2% of capital expenditures planned for this period.

As Vedomosti writes with reference to MMK Economics Director Andrei Eremin, 72 out of 98 IT projects are aimed at improving the efficiency of production processes. and the rest - for research and improvement of production safety.

Magnitogorsk Iron and Steel Works (MMK) announced the launch of a digitalization program developed in conjunction with Deloitte

A person is no longer able to cope with a huge amount of data. And data today is an asset of industrial companies. It is important to create a data management system to understand which of them are needed and how to use them, "he explained.

The average payback period for one digital project at MMK is estimated at 1-3 years. It is planned to spend an average of 36 million rubles on each of them.

By 2025, MMK intends to receive an additional $686 million (42.3 billion rubles) of EBITDA profit from new projects. Digital initiatives will account for 14.7% (6.2 billion rubles) of revenues, and in the future they will allow the company to receive an additional 4.5% EBITDA annually, Eremin said.

According to him, up to 80% of the effect should be brought by IT projects in production, the remaining 20% - an increase in the internal efficiency of the company and client services. The publication reminds that in 2018-2019 MMK completed a number of digital projects. The effect of them in 2019 is estimated at $25 million.

Fitch Raitings analyst Yulia Buchneva notes that by the end of 2019, all companies in the industry are engaged in digitalization. It allows you to manage costs, improve sales channels, increase internal efficiency and generally competitiveness, she said.^[5]

History

2024: Purchase of the Tikhov mine for 22.5 billion rubles

In early February 2024, the Magnitogorsk Metallurgical Plant (MMK) disclosed the cost of the transaction for the purchase of the Tikhov mine in Kuzbass - 22.55 billion rubles, including 17.514 billion rubles in the form of loans repaid in favor of the former owners of the company. Read more here.

2021: TAdviser interview with ATACH Product Chief Dina Bakhareva

In April 2021, in an interview with TAdviserDina Bakhareva, the head of the ATACH product - the Russian system for management of business processes of electronic document management and corporate communications, told what qualities and "super-abilities" electronic document management systems should have for large industrial enterprises, what principles they should comply with, what are the main criteria for the choice and implementation of such systems, what are the features of the deployment of EDMS within a giant enterprise and how the implementation results can be assessed. Read more here.

1931

The builder of Magnitogorsk Kalmykov on a train traveling to Magnitogorsk. Ftograf: Max Vladimirovich Alpert, Ural region, a village during the construction of the Magnitogorsk Metallurgical Plant (in the future Chelyabinsk region, Magnitogorsk), 1930-1931

Notes