Metinvest EBITDA added 3% m/m in July

EBITDA at Ukraine’s
largest steelmaker Metinvest (METINV) rose 3.4% m/m to USD 963 mln in July,
according to its monthly results published on Oct. 5. The holding’s revenue
inched up 1.6% m/m to USD 1,749 mln.

 

EBITDA excluding
joint ventures (JVs) slid 1.9% m/m to USD 790 mln in July.

 

Metinvest’s
operating cash flow before working capital changes increased 6.1% m/m to USD
778 mln in July, whereas cash flow from operations after working capital
changes (but before profit tax and interest) soared 31.8% m/m to USD 977 mln.

 

Cash inflow due to
changes in accounts receivable was USD 457 mln in July (vs.an outflow of USD
139 mln in June). Cash outflow due to changes in accounts payable was USD 151
mln (vs. an inflow of USD 242 mln in June).

 

The holding’s cash
outflow from investment activities skyrocketed 8.5x m/m to USD 314 mln in July.
Metinvest’s outflow from financing activities amounted to USD 22 mln and its
end-of-month cash balance soared 43.7% m/m to USD 2,074 mln. Its gross debt slid
USD 10 mln m/m to USD 2,449 mln, while its net debt plunged USD 641 mln m/m to
USD 375 mln.

 

Metinvest
metallurgical segment’s EBITDA (including JVs) rose 4.7% m/m to USD 420 mln in
July, while its mining segment’s EBITDA slid 6.2% m/m to USD 610 mln.

 

Excluding JVs,
Metinvest metallurgical segment’s EBITDA slid 1.1% m/m to USD 369 mln in July,
while its mining segment’s EBITDA lost 11.6% m/m to USD 489 mln.

 

The ratio of
Metinvest’s net debt to its LTM EBITDA (excluding JVs) dropped to 0.08x at the
end of July, down from 0.23x a month ago.

 

Metinvest’s iron and
steel product prices continued rising m/m in July, gaining 9% for pig iron, 8%
for slabs, 4% for billets, 9% for flat products and 1% for long products. Its
iron ore concentrate price gained 8% m/m in July, while the pellet price jumped
8% m/m.

 

Dmytro Khoroshun: Metinvest’s monthly EBITDA likely
had peaked in June-July because its iron and steel prices had peaked in May-June. The plunge in global iron ore
prices that started in July will further decrease Metinvest’s profitability
starting from September-October.

 

Nevertheless,
Metinvest’s monthly EBITDA should amount to at least USD 200-300 mln in the
next few quarters, we expect, keeping its net leverage comfortably below 1x.

 

The jump in
Metinvest’s investing activities cash outflow to USD 314 mln was likely driven
by its acquisition of Dniprovskyy
Steel assets
for a price of USD 339 mln.

 

The cash inflow due
to changes in accounts
receivable in July, USD 457 mln, was unusually large. Some of it was possibly
due to Metinvest’s elevated power over its consumers because of the peak prices
for its products. Withdrawal of some working capital was possibly in order
because Metinvest experienced cash outflows of USD 429 mln in 1H21 and USD 347
mln in 2020 due to changes in accounts receivable.

 

Nevertheless, some
of the USD 457 mln inflow in July was possibly due to Metinvest’s collection on
accounts receivable that it acquired as a part of Dniprovskyy Steel assets.

 

We maintain our
neutral view on METINV bonds.