Metinvest EBITDA drops 33% m/m in September

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) dropped 32.8% m/m in September to USD 80 mln, according to its monthly
results published on Dec. 17. The holding’s revenue gained 2.3% m/m to USD 873
mln. Metinvest’s operating cash flow before working capital changes dropped
29.2% m/m to USD 75 mln, whereas cash flow from operations (before profit tax
and interest) plunged to negative USD 13 mln in September from positive USD 131
mln in August.

The holding’s cash inflow from investment activities
was USD 21 mln (including USD 80 mln in dividends received),
compared with USD 59 mln in outflow in August. Metinvest’s outflow from
financing activities amounted to USD 35 mln and its end-of-month cash balance
dropped 16.8% m/m to USD 198 mln. Its gross debt dropped USD 24 mln m/m to USD
2,655 mln.

Metinvest’s metallurgical segment EBITDA was USD -22
mln in September, an improvement over USD -43 mln in August, while its mining
segment EBITDA plunged 45.4% m/m to USD 89 mln.

In 9M19, Metinvest’s revenue dropped 6.3% yoy to USD
8,490 mln, while its EBITDA plunged 38.8% to USD 1,234 mln.

Steel product prices dropped m/m in September, losing
4% for pig iron, 6% for billets, 2% for flat products and 3% for long products.
Iron ore product prices plunged 18% m/m for concentrate and 15% m/m for
pellets.

Dmytro Khoroshun: As we expected, Metinvest’s EBITDA plummeted in September,
driven by the plunge in iron ore prices worldwide in August. We continue to
expect Metinvest’s total monthly EBITDA to amount to USD 70-100 mln in the next
few months.

In 1Q20, Metinvest’s profitability might improve,
driven by a rebound in Ukraine’s export iron and steel prices since early
November.

We maintain our neutral view on METINV bonds.