Metinvest EBITDA surges 53% m/m in April

Ukraine’s largest steelmaker Metinvest (METINV) enjoyed a 53% m/m increase in EBITDA to USD 139 mln in April, the company reported in monthly preliminary financial results released on June 29. Both the metallurgical and mining divisions contributed almost evenly to this financial result.

Despite the strong monthly EBITDA, free cash flow came in negative at USD -37 mln, due to investments into working capital of USD 118 mln during the month, according to Concorde Capital’s analysis. As a result, its cash balance decreased to USD 167 by end-April from USD 196 mln in March.

Roman Topolyuk: If annualized, Metinvest’s April EBITDA corresponds to around USD 1.7 bln per year. This is somewhat close to the level of USD 2 bln that Metinvest used to earn in previous years. The result was driven by steel and iron ore price increases, and by our estimates, by some reduction of production costs in its metallurgical division, even despite a 2.9% m/m hryvnia appreciation in April.

Cash on balance below the threshold of USD 180 mln (at USD 167 mln) dissolved hopes that the company might pay out more than 30% of its accrued interest very soon. On the other hand, Metinvest had been financing its liquidity via working capital releases during the six months before April, so it is natural for the company to have some investments into working capital now, when EBITDA recovered. 

We expect even stronger monthly EBITDA to be reported for May (by end-July), driven by rising global steel prices and insignificantly offset by a correction in iron ore prices. Our view on Metinvest’s Eurobonds is positive.