Metinvest EBITDA drops 3% m/m in May

May EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) decreased 3.0% m/m to USD 224 mln, according to its monthly results
published on Aug. 28. The holding’s revenue contracted 6.4% m/m to USD 998 mln.
Metinvest’s operating cash flow before working capital changes increased 4.4%
m/m to USD 189 mln, whereas cash flow from operations (before profit tax and
interest) plunged 59% m/m to USD 68 mln in May.

Metinvest’s taxes paid skyrocketed to USD 95 mln from
USD 4 mln in April, while interest paid jumped to USD 79 mln from USD 21 mln in
April. The holding reported a cash outflow from investment activities of USD 68
mln (vs. an inflow of USD 129 mln in April). Metinvest’s cash outflow from
financing activities amounted to USD 200 mln and its end -May cash balance
crashed 58% m/m to USD 268 mln.

Dmytro Khoroshun: Metinvest’s
business remained strong in May, with prices increasing m/m for semi-finished
products (pig iron 4%, slabs 3%, billets 9%) and dropping slightly, by 1%, for
finished products. The outsized USD 95 mln tax payment is due to profit tax
payment for the previous year (a regular May occurrence), whereas the
abnormally large USD 75 mln interest payment is likely a one-off due to the debt restructuring that was finalized in April.

We continue emphasizing the risks of Metinvest
declaring and paying large amounts of dividends, but do not see signs of this in the holding’s May
report. Indeed, the USD 200 mln financing outflow includes a USD 141 mln PXF loan prepayment and therefore is unlikely to include any sizable
dividend payments.