MMK returns to profit after selling Fortescue stake

Magnitogorsk Iron and Steel Works confirmed that it sold part of its stake in Australian iron ore company Fortescue Metals Group Ltd., which helped the third largest steelmaker in Russia to profit and reduce debt.

MMK sold shares of Fortescue in the first quarter for $ 68 million, it said in a statement. This helped the company achieve $ 157 million in net income in the first three months of 2016, up from a $ 125 million loss in the previous quarter, and cut net debt by 17 percent. The company's net debt fell to $ 929 million at the end of March and the ratio of net debt to earnings before interest, taxes, depreciation and amortization was 0.6, according to the statement.

MMK's profit was also supported by higher steel prices and a weaker ruble, which reduces domestic costs and increases export earnings. While revenues fell 11 percent from the previous quarter to $ 1.05 billion, EBITDA rose 4.4 percent to $ 287 million.

"Early signs of recovery in domestic demand and a gradual increase in ruble prices on the domestic market to par with export prices allow the company to count on improving its financial performance in the second quarter," the company said.

MMK said it plans to revise its dividend policy to pay at least 30 percent of the annual free cash flow to shareholders and make payments on a semi-annual basis. As a result, the shares rose 0.5 percent to 22.32 rubles. Shares are up 18 percent since the beginning of the year.