Metinvest 1H19 EBITDA drops 33%

Metinvest (METINV), Ukraine’s largest steelmaker,
released its 1H19 financial results on Sept. 16. The holding’s revenue lost 6%
yoy to USD 5,818 mln, EBITDA dropped 33% yoy to USD 890 mln, and net profit
fell 39% yoy to USD 408 mln. Its EBITDA margin decreased 6pp yoy to 15%, and
its net margin slid 4pp to 7%.

 

EBITDA of Metinvest’s mining segment rose 24% yoy to
USD 791 mln in 1H19, while that of its metallurgical segment plunged 83% yoy to
USD 132 mln.

 

Operating cash flows before working capital dropped
31% yoy to USD 792 mln. Net cash from operations increased 25% yoy to USD 570
mln. Operating cash outflow due to changes in working capital plunged to USD 2
mln from USD 356 mln in 1H19, as a USD 390 mln outflow due to receivables was
compensated by inflows of USD 120 mln due to inventories and USD 271 mln due to
payables in 1H19.

 

Metinvest’s CapEx amounted to USD 482 mln in 1H19, up
15% yoy, driven by a 52% yoy jump in its mining segment’s CapEx to USD 222 mln.

 

In 1H19, Metinvest paid USD 31 mln in dividends to its
owners (1H18: USD 29 mln). In 1H19, Metinvest provided USD 82 mln in a loan
(likely with 9% interest) to its majority owner SCM.

 

Net debt stood at USD 2,474 mln at June 30, flat ytd,
and the ratio of net debt to last-12-months EBITDA amounted to 1.2x, inching up
from 1.0x at the end of 2018.

 

Metinvest disclosed having acquired in August a 49%
stake in Dnipro Coke, a Ukrainian
coke producer with the annual capacity of 700 kt, for USD 11 mln in cash.

 

Dmytro Khoroshun: Metinvest’s
metallurgical business has entered difficult times, as we expect its monthly
EBITDA not to exceed the 1H19 average of USD 22 mln for at least several months
of 2H19, and likely until the year’s end. We expect Metinvest’s total monthly
EBITDA, supported by still-strong iron ore prices, to amount to USD 100-130 mln
for the rest of 2019, which will bring its net debt to EBITDA ratio to 1.5-1.7x
by the year’s end.

 

The amount of dividends paid and the sum paid for the
49% stake in Dnipro Coke were lower than we expected, which is positive.

 

We maintain our bullish view on METINV bonds.