Metinvest 1Q21 EBITDA skyrockets 3.9x

Metinvest (METINV), Ukraine’s largest steelmaker, released
its 1Q21 financial results on May 31. The holding’s revenue jumped 43% yoy to
USD 3,624 mln, EBITDA (including JVs) skyrocketed 3.9x yoy to USD 1,462 mln
(and was up 77% qoq), and its EBITDA margin surged 25pp yoy to 40%.

 

EBITDA (including JVs) of Metinvest’s mining segment
soared 3.4x yoy (and 99% qoq) to USD 953 mln in 1Q21, while that of its
metallurgical segment shot up 4.0x yoy (70% qoq) to USD 660 mln.

 

Excluding JVs, Metinvest’s total EBITDA skyrocketed
3.7x yoy (84% qoq) to USD 1,201 mln. Its mining segment EBITDA shot up 3.5x yoy
(2.2x qoq) to USD 740 mln, while the EBITDA of Metinvest’s metallurgical
segment climbed 3.3x yoy (74% qoq) to USD 612 mln.

 

Metinvest’s CapEx amounted to USD 147 mln in 1Q20,
down 1% yoy, with its mining segment CapEx inching up 2% yoy to USD 68 mln and
that of its metallurgical segment losing 21% yoy to USD 62 mln.

 

Net debt stood at USD 2,303 mln at March 31, up 9%
YTD, and the net leverage ratio of net debt to last-12-months EBITDA (including
JVs) amounted to 0.7x, dropping from 1.0x at the end of 2020. Excluding JVs,
Metinvest’s net leverage ratio dropped to 0.9x at March 31 from 1.2x at
end-2020.

 

Its mining segment’s sales to Southeast Asia (which
includes China) dropped 31% yoy (and 36% qoq) to 1.08 mmt, while sales to
Europe gained 6% yoy (and jumped 51% qoq) to 1.41 mmt.

 

Its metallurgical segment’s sales to Southeast Asia
plunged 96% yoy (and 93% qoq) to 7 kt, while sales to Europe rose 10% yoy (and
29% qoq) to 1.48 mmt and those to the MENA region added 5% yoy (but slid 1%
qoq) to 1.06 mmt.

 

Metinvest’s investing cash outflow related to CapEx
amounted to USD 149 mln in 1Q21 according to the accompanying presentation to
investors released on May 31. Other investing cash outflow of USD 417 mln for
1Q21 was primarily due to payments for the acquisition of the Pokrovske coal
business, Metinvest said. Financing cash outflow of USD 619 mln included PXF
prepayment of USD 150 mln and a net trade financing repayment of USD 47 mln,
according to the presentation.

 

Dmytro Khoroshun: Metinvest’s
EBITDA in 2Q21 will rise even further qoq because of the recent jumps in steel
and iron ore prices at the global markets, we expect.

 

The qoq increases in Metinvest’s sales to Europe for
both its metallurgical and mining segments is a further positive sign that
demand is getting stronger in regions other than China.

 

Metinvest’s other investing outflow of USD 417 mln is
difficult to explain solely by payments for corporate rights in the Pokrovske
coal business, which we estimate did not exceed USD 190 mln in relation to an increase of Metinvest’s stake
in early March. It is possible that the holding made further payments under the guarantee
issued by Metinvest for the obligations of its co-investors into the Pokrovske
coal business (the companies likely affiliated with Metinvest’s owners, the SCM
and Smart groups).

 

Metinvest possibly paid up to USD 300-400 mln in
dividends in 1Q21, we estimate from its financing cash outflow. We think that
in 2021 Metinvest might pay at least up to USD 0.5 bln in dividends, which will
be justified given the very high steel and iron ore prices.

 

We maintain our neutral view on METINV bonds.