Metinvest EBITDA plunges 50% m/m in June

EBITDA at Ukraine’s largest steelmaker Metinvest (METINV)
plunged 50% m/m in June to USD 94 mln, according to its monthly results
published on Sept. 16. The holding’s revenue lost 3.6% m/m to USD 982 mln.
Metinvest’s operating cash flow before working capital changes dropped 6.0% m/m
to USD 141 mln, whereas cash flow from operations (before profit tax and
interest) jumped 8.5x m/m to USD 196 mln in June.

 

The holding’s cash outflow from investment activities
slid 3.3% m/m to USD 89 mln, while outflow from financing activities amounted
to USD 3 mln and its end-of-month cash balance jumped 45.3% m/m to USD 279 mln.
Its gross debt rose USD 17 mln m/m to USD 2,753 mln.

 

Metinvest’s metallurgical segment EBITDA plunged in
the red to USD -20 mln in June from USD 31 mln in May, while its mining segment
EBITDA lost 28.8% m/m to USD 114 mln.

 

For 1H19, Metinvest’s revenue dropped 5.8% yoy to USD
5,818 mln, while its EBITDA plunged 33.3% to USD 890 mln.

 

Product prices plunged m/m in June, losing 5% for pig
iron, 6% for billets and slabs, 3% for flat products, 1% for long products, and
8% for pellets. However, iron ore concentrate price rose 3% m/m.

 

Dmytro Khoroshun: The results
are disappointing for both Metinvest’s metallurgical and mining segments. In
particular, we note that Metinvest sold 756 kt of pellets in June, the highest
monthly volume since 2016, at prices that were lower 8% m/m despite the
concentrate price rising 3% m/m in June.

 

We do not rule out that June’s weakness was in part
due to some half-year adjustments as, for example, sales of other products in
Metinvest’s mining segment, which average about USD 18 mln per month, amounted
to negative USD -5 mln in June.

 

Also, in its 1H19 financial statements released the
same day, Metinvest revealed USD 62 mln in impairments of receivables,
including USD 39 mln in its metallurgical segment and USD 21 mln in its mining
segment. These impairments likely impacted June’s EBITDA. Adjusting June’s
EBITDA for these impairments gives USD 156 mln, which is down only 17% m/m.

 

We expect Metinvest’s metallurgical segment EBITDA to
remain depressed in the next few months, in the range of USD 0-40 mln, because
of the ongoing weakness in the markets that only got worse since June. However,
Metinvest’s mining segment EBITDA should remain close to, and mostly above USD
100 mln per month because of the strong iron ore prices, even after August’s
price plunge.

 

We maintain our bullish view on METINV bonds.