Metinvest EBITDA jumps 29% m/m in May

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) jumped 28.6% m/m to USD 162 mln in May, according to its monthly
results published on Aug. 4. The holding’s revenue gained 13.6% m/m to USD 843
mln.

 

EBITDA excluding that of joint ventures (JVs) advanced
31.5% m/m to USD 146 mln in May.

 

Metinvest’s operating cash flow before working capital
changes soared 69.0% m/m to USD 142 mln in May, whereas cash flow from
operations after working capital changes (but before profit tax and interest)
jumped 69.2% m/m to USD 88 mln in May.

 

Cash flow due to changes in accounts receivable was
negative USD 112 mln in May, compared with positive USD 37 mln in April. Cash
flow due to changes in accounts payable was negative USD 8 mln in May, compared
with negative USD 70 mln in April.

 

The holding’s cash outflow from investment activities
rose 41.8% m/m to USD 95 mln. Metinvest’s inflow from financing activities
amounted to USD 27 mln and its end-of-month cash balance slid 3.7% m/m to USD
260 mln. Its gross debt inched up USD 25 mln m/m to USD 3,098 mln, while net
debt increased USD 35 mln m/m to USD 2,838 mln.

 

Metinvest’s metallurgical segment EBITDA (including
JVs) plunged 39.1% m/m to USD 39 mln in May, while its mining segment EBITDA
gained 19.1% m/m to USD 112 mln.

 

Excluding JVs, Metinvest’s metallurgical segment
EBITDA lost 30.8% m/m to USD 45 mln in May, while its mining segment EBITDA
advanced 15.4% m/m to USD 90 mln.

 

The ratio of Metinvest’s net debt to its LTM EBITDA
(excluding JVs) rose to 3.04x at the end of May, up from 2.96x a month ago.

 

In 5M20, Metinvest’s revenue dropped 14.8% yoy to USD
4,121 mln, while its EBITDA including JVs slid 17.0% to USD 661 mln and EBITDA
excluding JVs lost 15.9% yoy to USD 585 mln.

 

Iron and steel product prices retreated in May, losing
6% for pig iron, 8% for both billets and slabs, 4% for flat products and 6% for
long products. Its iron ore concentrate price was flat m/m in May, while the
pellet price lost 5% m/m.

 

Dmytro Khoroshun: Metinvest’s
net leverage actually exceeded its 3x limit as of end-May, but this will have
no consequences. Rather, it is the end-June covenant testing that will be
important, and we calculate that Metinvest needs to earn EBITDA (excluding JVs)
of only USD 71 mln, which seems very achievable.

 

We maintain our neutral view on METINV bonds.