Metinvest EBITDA jumps 19% m/m in September

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) jumped 19.1% m/m in September to USD 243 mln, according to its monthly
results published on Dec. 4. The holding’s revenue inched up 2.2% m/m to USD
911 mln. Metinvest’s operating cash flow before working capital changes
increased 16.1% m/m to USD 202 mln, whereas cash flow from operations (before
profit tax and interest) jumped 75.3% m/m to USD 163 mln in September.

The holding reported a net cash outflow from investment
activities of USD 132 mln (vs. USD 46 mln in August), including an inflow of
USD 42 mln from dividends received. Metinvest’s cash outflow from financing
activities amounted to USD 40 mln and its end-of-month cash balance slid 5.7%
m/m to USD 446 mln.

Prices for iron & steel products remained steady
m/m for both semi-finished products (pig iron -2%, slabs +2%, billets -4%) and
finished products (+1%).

Dmytro Khoroshun: Metinvest’s
September metallurgical segment EBITDA, USD 149 mln, looks abnormally high
compared with the average for the previous three months, USD 114 mln, possibly
due to the end-of-quarter adjustments. We expect Metinvest’s monthly EBITDA to
remain near USD 200 mln during 4Q18, possibly sliding below this level due to
the recent price drops.

The USD 42 mln of dividends received in September were
likely from Metinvest’s joint venture Southern Iron Ore. We calculate that
Metinvest has already received USD 346 mln from Southern Iron Ore in
April-September 2018 and should receive the remaining USD 35 mln in 4Q18.

The high end-September cash amount underlines the risks of Metinvest declaring and
paying large amounts of dividends. Metinvest already paid USD 29 mln of dividends in 1H18, and we
calculate that the holding is able to distribute USD 308 mln in dividends from 2017 income and USD
334 mln from 1H18 income.