Alchevsk Steel loses USD 84 mln judgment against Metinvest

A Donetsk regional court issued four judgments in mid-January, stipulating that Alchevsk Steel (ALMK UK) and Dniprovsky Iron & Steel Works (DMKD UK) are obliged to pay a total of UAH 1.2 bln (USD 150 mln) in charges to Metinvest (METINV). Both enterprises are steelmaking subsidiaries of Industrial Union of Donbass (IUD). The amount to be paid by ALMK is around USD 84 mln, which represents indebtedness for delivered iron ore concentrate and pellets in 2011-12, fines for delays in payment and charges for not purchasing previously agreed amounts of concentrate in 3Q12.

Roman Topolyuk: The ruling itself still has a negative meaning for the court winner as it reveals continuous problems with payment delays from Metinvest’s main domestic customer (IUD). Recall, Metinvest’s receivables increased 15% YTD to USD 3.5 bln in 1H12, and the lawsuit suggests there may be no improvements in 2H12. However, the ruling might improve payment discipline from IUD enterprises as it appeared that the financing of their operations via payables is not free of charge – a quarter of the amount to be paid to Metinvest represents fines and charges. Payments by Alchevsk Steel might improve in January-February given its recent production and sales boost. The company produced 370 kt of steel in December 2012 (implying a 61% load of steel production capacity), in contrast with its lowest result last year of 288 kt in July 2012 (48% load).