Metinvest EBITDA rises 9% m/m in May

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) increased 8.7% m/m in May to USD 188 mln, according to its monthly
results published on July 26. The holding’s revenue gained 6.8% m/m to USD
1,019 mln. Metinvest’s operating cash flow before working capital changes
jumped 35.1% m/m to USD 150 mln, whereas cash flow from operations (before
profit tax and interest) plunged 84.2% m/m to USD 23 mln in May.

The holding’s cash outflow from investment activities
jumped 53.3% m/m to USD 92 mln, while outflow from financing activities
amounted to USD 34 mln and its end-of-month cash balance dropped 42.0% m/m to
USD 192 mln. The holding’s gross debt slid USD 18 mln m/m to USD 2,736 mln.

Metinvest’s metallurgical segment EBITDA plunged 41.5%
m/m to USD 31 mln in May, while its mining segment EBITDA gained 6.0% m/m to
USD 160 mln.

For 5M19, Metinvest’s revenue dropped 4.9% yoy to USD
4,836 mln, while its EBITDA plunged 27.9% yoy to USD 796 mln.

Iron and steel prices corrected m/m in May, dropping
3% for pig iron and billets, 1% for flat products, and 2% for long products.
However, the slab price gained 3% m/m, the iron ore concentrate price jumped
11% m/m, and the pellet price rose 2% m/m.

Dmytro Khoroshun: We expect
Metinvest’s metallurgical segment EBITDA to remain in the depressed USD 10-50
mln per month range in the next few months because of the ongoing weakness in
steel prices exacerbated by the jump in iron ore prices. However, Metinvest’s
mining segment EBITDA should continue to outperform, remaining above USD
130-140 mln per month because of the strong iron ore prices.

It is important to remember that despite the currently
low EBITDA, Metinvest’s metallurgical segment is valuable to the holding’s
mining segment as a customer with most favorable logistics for iron ore product
sales.

We maintain our bullish view on METINV bonds.