Metinvest EBITDA jumps 54% m/m in July

EBITDA at Ukraine’s largest steelmaker Metinvest (METINV)
jumped 54.3% m/m in July to USD 145 mln, according to its monthly results
published on Oct. 22. The holding’s revenue lost 3.7% m/m to USD 946 mln.
Metinvest’s operating cash flow before working capital changes dropped 19.1%
m/m to USD 114 mln, whereas cash flow from operations (before profit tax and
interest) lost 8.7% m/m to USD 179 mln in July.

 

The holding’s cash outflow from investment activities
jumped 43.8% m/m to USD 128 mln, while outflow from financing activities
amounted to USD 18 mln and its end-of-month cash balance rose 8.6% m/m to USD
303 mln. Its gross debt dropped USD 22 mln m/m to USD 2,731 mln.

 

Metinvest’s metallurgical segment EBITDA dropped
further into the red to USD -26 mln in July from USD -20 mln in June, while its
mining segment EBITDA jumped 52.6% m/m to USD 174 mln.

 

For 7M19, Metinvest’s revenue dropped 6.8% yoy to USD
6,764 mln, while its EBITDA plunged 34.0% to USD 1,035 mln.

 

Iron and steel product prices were mixed m/m in July,
losing 2% for slabs, but gaining 2% for pig iron and billets, and 1% for flat
products. Iron ore product prices jumped 7% m/m for concentrate and 2% m/m for
pellets.

 

Dmytro Khoroshun: In
comparison with Metinvest’s June EBITDA adjusted for
impairment of receivables, USD 156 mln, the holding’s July EBITDA lost 7%.

 

The iron ore prices that are factored in Metinvest’s
mining segment revenue should peak in July-August, with a delay of about a month
from the June-July peak of the index (deal conclusion) prices. Therefore, we
expect Metinvest’s EBITDA in August to be as strong for its mining segment and
as weak for its metallurgical segment as in July.

 

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.