Metinvest steel output increases 4% m/m in October

Attributable crude steel production at the subsidiaries of Ukraine’s largest steel maker Metinvest (METINV) rose 4% m/m to 892 kt in October, according to Concorde Capital’s analysis of separate company results provided by Interfax-Ukraine. This amounted to a 1% m/m increase on an average daily basis. The above data includes Azovstal (AZST UK), Ilyich Steel (MMKI UK), Yenakiyeve Steel (ENMZ UK) and a 49.9% portion of Zaporizhstal’s result (accounted for as a JV).

The steel production increase was mostly driven by improved operating performance at Yenakiyeve Steel (+25% m/m to 181 kt) and Ilyich Steel (+5% m/m to 206 kt). Steel output at Azovstal decreased 0.6% m/m to 339 kt.

In 10M16, Metinvest’s attributable steel production grew 4% yoy to 8.7 mmt, we calculate.

Andriy Perederiy: The results for October looks surprisingly strong again, taking into account the company CEO’s comment last month that an overhaul of the railway connection with Maruipol (the location of  Azovstal and Ilyich Steel) would negatively affect output. Importantly on Nov. 9, Ukrainian Railways completed the reconstruction of this railway line, which removes the risk of logistics bottlenecks for Metinvest’s biggest steel mills. 

The solid output allows us to expect Metinvest will pay a high cash coupon on its Eurobonds for October, which has yet to be announced. The statistics allow us to keep unchanged our 2016 forecast for Metinvest’s attributable steel production at 10.5 mmt (+9% yoy), as well as maintain our bullish view on METINV Eurobonds.