Metinvest steel products down 12%, ore products up 9% in 9M12

Ukraine’s top steel producer Metinvest (METINV) reported operating results for 3Q and 9M12. The holding company decreased output of crude steel 13% yoy and steel products 12% yoy (to 9.0 mmt) in 9M12 with finished products output declining 7% yoy. The share of semi-finished products in its product mix fell to 22% in 9M12 from 25% in 9M11, driven by the decrease in demand for slabs, which has not been offset by an increase in the demand for billets. Large-diameter pipe production fell 27% yoy (to 326 kt) in 9M12 due to the finalization of a pipeline construction project and the deferment of another. Iron ore products output grew 9% yoy (to 15.1 mmt) in 9M12, spurred by higher pellets production for third parties (+38% yoy). 

Roman Topolyuk: Metinvest underperformed its Russian peers in terms of steel and finished products output, but demonstrated better results in its iron ore segment, the key EBITDA driver. Market weakness is extending into 4Q12 and two out of three Metinvest steelmakers have announced mom cuts in November production plans: Azovstal (AZST UK) is going to reduce heavy plate output 26-32% mom and Illich Iron & Steel Works (MMKI UK) plans to reduce cold rolled products output 30% mom due to ongoing repairs in its cold rolling shop, the Metal Courier publication reported at the end of last week. With stable or falling steel product prices throughout 4Q12, we expect to see a worse financial performance by Metinvest in 2H12 compared to the first half.