Metinvest EBITDA plunges 67% m/m in June due to one-offs

EBITDA at Ukraine’s largest steelmaker Metinvest
(METINV) plunged 66.7% m/m to USD 54 mln in June, according to its monthly
results published on Sept. 8. The holding’s revenue inched up 0.5% m/m to USD
847 mln.

 

Metinvest impaired accounts receivable totaling USD
112 mln in June, according to its monthly report. Its June EBITDA adjusted for
this one-off impairment was USD 166 mln, or 2.5% more m/m.

 

EBITDA excluding that of joint ventures (JVs) dropped
80% m/m to USD 29 mln in June.

 

Metinvest’s operating cash flow before working capital
changes slid 0.7% m/m to USD 141 mln in June, whereas cash flow from operations
after working capital changes (but before profit tax and interest) skyrocketed
4.0x m/m to USD 351 mln in June.

 

Cash flow due to changes in accounts receivable was
positive USD 83 mln in June, compared with negative USD 112 mln in May. Cash
flow due to changes in accounts payable was positive USD 120 mln in June,
compared with negative USD 8 mln in May.

 

The holding’s cash outflow from investment activities
plunged 73% m/m to USD 26 mln. Metinvest’s cash outflow from financing
activities amounted to USD 102 mln and its end-of-month cash balance soared 79%
m/m to USD 465 mln. Its gross debt dropped USD 88 mln m/m to USD 3,010 mln,
while net debt plunged USD 293 mln m/m to USD 2,545 mln.

 

Metinvest’s metallurgical segment EBITDA (including
JVs) plunged to negative USD 30 mln in June from positive USD 39 mln in May,
while its mining segment EBITDA dropped 44% m/m to USD 63 mln.

 

Excluding JVs, Metinvest’s metallurgical segment
EBITDA plunged to negative USD 24 mln in June from positive USD 45 mln in May,
while its mining segment EBITDA retreated 64% m/m to USD 32 mln.

 

Metinvest’s net leverage ratio, that of its net debt
to its last-12-month (LTM) EBITDA (excluding JVs), dropped to 2.82x at the end
of June, down from 3.04x a month ago, according to Concorde Capital
calculations.

 

In 1H20, Metinvest’s revenue dropped 15% yoy to USD
4,968 mln, while its EBITDA including JVs retreated 20% yoy to USD 715 mln and
EBITDA excluding JVs lost 19% yoy to USD 615 mln.

 

Iron and steel product prices mostly retreated in
June, losing 13% for slabs, 8% for flat products and 3% for long products, but
gaining 3% for pig iron and remaining flat for billets. Its iron ore
concentrate price inched up 3% m/m in June, while the pellet price jumped 10%
m/m.

 

Dmytro Khoroshun: Metinvest’s
business remained overall strong in June as implied by its EBITDA before the
one-off impairments inching up 2.5% m/m in June. However, because of June’s
one-offs, Metinvest’s net leverage ratio would have exceeded the 3x covenant
limit at end-June had it not been for the USD 210 mln of cash Metinvest
withdrew from its working capital that month.

 

We maintain our neutral view on METINV bonds.