Metinvest EBITDA rebounds 22% m/m in January

EBITDA at Ukraine’s largest steelmaker Metinvest (METINV)
jumped 22.3% m/m in January to USD 126 mln, according to its monthly results
published on Apr. 11. The holding’s revenue lost 7.0% m/m to USD 900 mln.
Metinvest’s operating cash flow before working capital changes plunged 24.2%
m/m to USD 116 mln, whereas cash flow from operations (before profit tax and
interest) jumped 66% m/m to USD 13 mln in January.

The holding reported a net cash outflow from
investment activities of USD 90 mln (vs. an inflow of USD 28 mln in December).
Metinvest’s cash outflow from financing activities amounted to USD 60 mln and
its end-of-month cash balance dropped 20.4% m/m to USD 223 mln. The holding’s
gross debt dropped USD 20 mln m/m to USD 2,723 mln.

Metinvest’s metallurgical segment EBITDA rose to USD
18 mln in January (vs. USD -9 mln in December), while its mining segment EBITDA
lost 12.4% m/m to USD 99 mln.

Product prices continued demonstrating weakness m/m,
falling 6% for pig iron, 3% for billets, and 1% for flat products.

Dmytro Khoroshun: Adjusting
Metinvest’s December EBITDA to USD 158 mln for USD 55 mln of one-off impairments,
we calculate that the holding’s EBITDA before one-offs dropped 20.3% m/m in
January. In particular, the metallurgical segment’s EBITDA likely plunged 60.9%
m/m to USD 18 mln from USD 46 mln in December (adjusted for one-offs). This
result is even worse than the USD 40-60 mln per month we expected
due to the plunge in steel prices during August 2018 – January 2019. However,
we expect the profitability of Metinvest’s metallurgical segment to improve in
2019 on the back of February’s steel price rebound.

Comparing the USD 20 mln drop in gross debt with USD 60
mln in cash used in financing activities, we conclude that Metinvest might had
paid USD 40 mln in dividends in January, a rate in line with USD 0.4-0.5 bln in dividends we expect for 2019.