Metinvest EBITDA rises 3% m/m in June

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) increased 3.1% m/m in June to USD 231 mln, according to its monthly
results published on Aug. 31. The holding’s revenue expanded 9.8% m/m to USD
1,096 mln. Metinvest’s operating cash flow before working capital changes
increased 6.9% m/m to USD 202 mln, whereas cash flow from operations (before
profit tax and interest) jumped 4.3x m/m to USD 292 mln in June.

The holding reported a cash inflow from investment
activities of USD 6 mln, including dividends received of USD 68 mln (vs. an
outflow of USD 68 mln in May). Metinvest’s cash outflow from financing
activities amounted to USD 160 mln and its end-of-month cash balance expanded
38% m/m to USD 370 mln.

For 1H18, Metinvest’s revenue increased 58% yoy to USD
6.18 bln, while EBITDA rose 59% yoy to USD 1.34 bln. By segment, the 12% yoy
drop in the mining segment EBITDA to USD 638 mln was more than offset by a 3.7x
jump in the metallurgical segment EBITDA to USD 755 mln.

Dmytro Khoroshun: Metinvest’s
business remained steady in June, with prices weakening m/m for both
semi-finished products (slabs 3%, billets 6%) and finished products (1%). We
expect Metinvest’s monthly EBITDA to remain near USD 200 mln in 3Q18,
continuing the strong year-long run following the steel prices increase in 3Q17.

The USD 68 mln of dividends received in June were
likely from Metinvest’s joint venture Southern Iron Ore, which is to pay Metinvest a total of USD 381 mln of dividends
(after tax) for 2013-2017. Metinvest had already received USD 193 mln in April
and should receive the remaining USD 120 mln in 2H18.

We continue emphasizing the risks of Metinvest declaring and
paying large amounts of dividends, and think that some of USD 160 mln used for financing purposes in June
could be dividends to Metinvest’s owners. We calculate that Metinvest is able to distribute USD 308 mln
in dividends for 2017 income and potentially at least as much for 1H18 income
once it releases its financial statements for this period.