Metinvest EBITDA drops 12% m/m in August

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) decreased 12.4% m/m in August to USD 204 mln, according to its monthly
results published on Nov. 1. The holding’s revenue plunged 17.7% m/m to USD 891
mln. Metinvest’s operating cash flow before working capital changes decreased
12.1% m/m to USD 174 mln, whereas cash flow from operations (before profit tax
and interest) plunged 71.3% m/m to USD 93 mln in August.

The holding reported a net cash outflow from
investment activities of USD 46 mln (vs. USD 60 mln in July), including an
inflow of USD 43 mln from dividends received. Metinvest’s cash outflow from
financing activities amounted to USD 55 mln and its end-of-month cash balance
slid 16.4% m/m to USD 473 mln.

Metinvest’s sales of flat steel products dropped by
26.8%, or 214 kt m/m, including a 33.6% (123 kt) m/m plunge in resales of flat
products from its Zaporizhstal JV.

Iron and steel product price m/m dynamics were mixed,
with pig iron price increasing 3%, slab price dropping 2%, and finished product
prices unchanged.

Dmytro Khoroshun: We expect
Metinvest’s monthly EBITDA to remain near USD 200 mln for the rest of 2018,
with its flat products sales volumes stabilizing after August’s drop.

The USD 43 mln of dividends received in August were
likely from Metinvest’s joint venture Southern Iron Ore, which is to pay
Metinvest a total of USD 381 mln of dividends (after tax)
for 2013-2017. Metinvest had already received USD 193 mln in April and USD 68 mln in June, and should
receive the remaining USD 77 mln in 2H18.

The high end-August cash amount underlines the
risks of Metinvest declaring and paying large amounts of dividends. Metinvest already paid USD 29 mln of dividends in
1H18, and we calculate that the holding is able to distribute USD 308 mln in dividends from 2017 income and USD
334 mln from 1H18 income.