Metinvest EBITDA drops 18% m/m in August

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) dropped 17.9% m/m in August to USD 119 mln, according to its monthly
results published on Nov. 1. The holding’s revenue lost 9.8% m/m to USD 853
mln. Metinvest’s operating cash flow before working capital changes dropped
7.0% m/m to USD 106 mln, whereas cash flow from operations (before profit tax
and interest) lost 26.8% m/m to USD 131 mln in August.

The holding’s cash outflow from investment activities
plunged 53.9% m/m to USD 59 mln, while outflow from financing activities
amounted to USD 43 mln and its end-of-month cash balance dropped 21.5% m/m to
USD 238 mln. Its gross debt dropped USD 52 mln m/m to USD 2,679 mln.

Metinvest’s metallurgical segment EBITDA plunged
further into the red to USD -43 mln in August from USD -26 mln in July, while
its mining segment EBITDA slid 6.3% m/m to USD 163 mln.

For 8M19, Metinvest’s revenue dropped 6.6% yoy to USD
7,617 mln, while its EBITDA plunged 34.9% to USD 1,154 mln.

Steel product prices mostly dropped m/m in August,
losing 5% for slabs, 4% for billets and 2% for long products. However, prices
for flat products were flat m/m, and pig iron prices rose 5% m/m. Iron ore
product prices slid 6% m/m for concentrate and 1% m/m for pellets.

Dmytro Khoroshun: From
September, Metinvest’s mining segment EBITDA should be lower, around USD 100
mln a month, reflecting the August plunge in iron ore prices worldwide.

However, the positive effect of lower iron ore prices
for Metinvest’s metallurgical segment EBITDA will be more than offset by the
10-20% plunge in Ukraine’s export steel prices from July to October, we
estimate. Therefore, the metallurgical segment’s monthly EBITDA will likely
remain in the red or close to zero until the end of 2019.

We maintain our bullish view on METINV bonds.