Metinvest EBITDA drops 9% m/m in January

January EBITDA at Ukraine’s largest steel maker
Metinvest (METINV) decreased 9.2% m/m to USD 228 mln, according to its monthly
results published on March 29. The holding’s revenue expanded 10.3% m/m to USD
1,009 mln. Its operating cash flow before working capital changes grew 11.7%
m/m to USD 201 mln, whereas cash flow from operations (before profit tax and
interest) dropped 25.2% m/m to USD 92 mln in January. The holding’s CapEx
decreased 1.6% m/m to USD 62 mln and its end-of-month cash balance improved 5%
m/m to USD 273 mln.

Dmytro Khoroshun: Another
strong month for Metinvest regarding EBITDA, but the operating cash conversion
was very poor, owing to an epic USD 205 mln outflow due to accounts receivable.
We think that Metinvest was keeping its cash at low levels in January as it was
preparing for the Feb. 18 cash sweep payment and,
ultimately, for the upcoming March refinancing and restructuring
announcement.

Despite the m/m increase in steel prices for most of
Metinvest’s products (pig iron by 5%, slabs by 4%, billets by 4%, finished
products by 1%), the EBITDA margin of the holding’s metallurgical segment
decreased from 20% in December to 16% in January. The EBITDA margin of
Metinvest’s mining segment was unchanged m/m at 43% in January.

We continue to expect Metinvest’s monthly EBITDA to be
close to, or exceed, the USD 200 mln level well into 2018 due to strong iron
ore and steel prices.