Metinvest EBITDA plunges 41% m/m in October

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) plunged 40.7% m/m to USD 342 mln in October, according to its monthly
results published on Jan. 12. The holding’s revenue dropped 16.3% m/m to USD 1,370
mln.

 

EBITDA excluding joint ventures (JVs) lost 39.3% m/m
to USD 313 mln in October.

 

Metinvest’s operating cash flow before working capital
changes plunged 41.9% m/m to USD 307 mln in October, whereas cash flow from
operations after working capital changes (but before profit tax and interest)
lost 38.5% m/m to USD 437 mln.

 

Cash inflow due to changes in accounts receivable rose
13.0% m/m to USD 130 mln in October. Cash inflow due to changes in accounts
payable jumped 3.3x to USD 26 mln in October.

 

The holding’s cash outflow from investment activities
inched up 2.2% to USD 93 mln. Metinvest’s outflow from financing activities
amounted to USD 764 mln and its end-of-month cash balance dropped 22.4% m/m to
USD 1,557 mln. Its gross debt slipped USD 8 mln m/m to USD 2,237 mln, while its
net debt jumped USD 441 mln m/m to USD 680 mln.

 

Metinvest’s metallurgical segment EBITDA (including
JVs) dropped 39.2% m/m to USD 163 mln in October, while its mining segment’s EBITDA
plunged 51.6% m/m to USD 120 mln.

 

Excluding JVs, Metinvest’s metallurgical segment
EBITDA lost 37.2% m/m to USD 137 mln in October, while its mining segment’s
EBITDA plummeted 50.6% m/m to USD 117 mln.

 

The ratio of Metinvest’s net debt to its LTM EBITDA
(excluding JVs) rose to 0.12x at the end of October, up from 0.04x a month ago.

 

Metinvest’s iron and steel product prices continued
dropping m/m in October, losing 8% for pig iron, 4% for slabs, 11% for billets,
5% for flat products and 4% for long products. Its iron ore concentrate price
dived 38% m/m in October, while the pellet price dropped 18% m/m.

 

Dmytro Khoroshun: Metinvest
likely paid around USD 750 mln in dividends in October, we infer from the
financing activities cash outflow.

 

Metinvest has paid about USD 1.8 bln in dividends in
10M21, including USD 750 mln in October, USD 600 mln in September, and USD 423 mln in 1H21, we
estimate.

 

Further dividend payments are possible in
November-December and in 2022 as the holding’s cash pile remains about USD 1
bln above its minimum liquidity required for smooth operations.

 

A possible one-off adjustment of about USD 25 mln
likely depressed Metinvest’s EBITDA in October because revenue from other
products and services in its mining segment was a negative USD 13 mln compared
with a monthly average of positive USD 13 mln for the previous twelve months.

 

In any case, the main reason for the EBITDA plunge in
October was the continuing downtrend in steel and iron ore prices. Looking past
October, Ukraine FOB steel prices bottomed out in October but resumed their
decline in December, whereas global iron ore prices are still rebounding after
their November low.

 

Metinvest’s monthly EBITDA will amount to USD 300-500
mln in November-December, we expect.

 

Metinvest’s monthly EBITDA should amount to at least USD
200-300 mln in the next few quarters, we expect, keeping its net leverage
comfortably below 1x.

 

We maintain our neutral view on METINV bonds.