Metinvest confirms EBITDA surged 2.4x in 1Q17

Revenue at Ukraine’s largest steelmaker Metinvest
(METINV) increased 44% yoy to USD 1.85 bln in 1Q17, according to its quarterly
update published on June 30. Its revenue rose due to higher demand from most
regions except Southeast Asia (-8% yoy to USD 151 mln, 8% of total revenue).
The company’s key market, the European region, contributed 37% to total revenue
in 1Q17, an increase of 2pp yoy.

Metinvest also reported a set of quarterly financials
that were previously available to the market in its monthly reports. Some
financials revealed no 1Q17 adjustments: EBITDA increased 2.4x yoy to USD 402
mln, while total debt slipped just 0.6% to USD 2.95 bln from December 2016.
CapEx jumped 91% yoy to USD 103 mln.

Metinvest’s metallurgical division revenue increased
46% yoy to USD 1.47 bln, as prices rose 54% yoy. Revenue at its mining division
rose 38% yoy to USD 0.38 bln, as prices rose 80% yoy. However, the holding’s
revenue increase was partially offset by falling sales volume in its
metallurgical division, by 8% yoy to 2,807 kt, and in its mining division, by
42% yoy to 3,574 kt.

Andriy Perederey: With these
figures, Metinvest confirmed its preliminary 1Q17 EBITDA that we reported on earlier. As for 2Q17, we expect stable
operating performance, even with the loss of its assets in the occupied
territories and slowing sales volumes (which were offset by higher prices). At
the same time, we expect 2Q17 financial results will be weaker due to lower
iron ore prices.

All in all, the holding has
the ability to generate enough free cash flow for all its creditors in 2017.
And we are keeping a positive view on Metinvest bonds.