Metinvest EBITDA jumps 47% m/m in March

EBITDA at Ukraine’s largest steelmaker Metinvest (METINV)
jumped 47.2% m/m in March to USD 184 mln, according to its monthly results
published on May 24. The holding’s revenue gained 10.6% m/m to USD 1,031 mln.
Metinvest’s operating cash flow before working capital changes rose 28.3% m/m
to USD 154 mln, whereas cash flow from operations (before profit tax and
interest) plunged 58.2% m/m to USD 92 mln in March.

 

The holding’s cash outflow from investment activities
rose 4.1% m/m to USD 101 mln, while outflow from financing activities amounted
to USD 11 mln and its end-of-month cash balance dropped 21.6% m/m to USD 218
mln. The holding’s gross debt dropped USD 1 mln m/m to USD 2,682 mln.

 

Metinvest’s metallurgical segment EBITDA jumped 11.5x
m/m to USD 46 mln in March, while its mining segment EBITDA gained 24.4% m/m to
USD 148 mln.

 

Iron and steel product prices finally stabilized m/m,
rising 8% for pig iron, 5% for billets, and 3% for flat products. However, the
price of long products was flat m/m, while slab prices continued dropping m/m
at -2% in March. Prices of iron ore products jumped m/m in March: concentrate
by 8%, pellets by 11%.

 

Metinvest’s 1Q19 EBITDA amounted to USD 435 mln, down
33% yoy, the holding confirmed in its 1Q19 trading update with select financial
results published May 24. Its metallurgical segment EBITDA plunged 82% yoy to
USD 68 mln in 1Q19, as revenues decreased to USD 2,333 mln, or 10% yoy, of
which 6pp was due to price and 4pp due to volumes. Metinvest’s mining segment
EBITDA inched up 5% yoy to USD 366 mln as revenue from sales to third parties
rose to USD 530 mln or 23% yoy, of which 3pp was due to price and 19pp was due
to volume.

 

Metinvest’s CapEx dropped 8% yoy to USD 198 mln in
1Q19. Its financing cash outflow amounted to USD 89 mln in 1Q19, of which USD
45 mln was due to a drop in trade finance lines and USD 15 mln due to repayment
of consideration for 24.99% of its affiliate Pokrovske Coal.

 

Dmytro Khoroshun: The
holding’s metallurgical segment EBITDA finally rebounded in March, following
the rebound in Ukraine’s export iron and steel prices in February. However,
Ukraine’s export prices fell again in April-March, and therefore we expect
Metinvest’s metallurgical segment EBITDA to remain depressed (USD 40-60 mln per
month) around mid-2019.

 

On the other hand, the performance of Metinvest’s
mining segment should remain strong (at least USD 120-130 mln per month) at
least until mid-3Q19 due to the elevated world iron ore prices following the
Vale mine disaster in Brazil and Metinvest’s strong production volumes.

 

Looking at the cash outflow from financing
activities, Metinvest apparently paid not more than USD 29 mln in dividends in
1Q19, a very modest amount considering its USD 540 mln in returns to
shareholders  in 2018. We
expect Metinvest paying up to USD 500 mln in dividends in 2019, which the
holding should be able to cover almost fully from its operating cash flow and
possibly up to USD 300 mln in additional borrowings.