Metinvest EBITDA plunges to negative USD 39 mln in December

EBITDA at Ukraine’s largest steelmaker Metinvest (METINV)
dropped to negative USD 39 mln in December from negative USD 2 mln in November,
according to its monthly results published on Mar. 4. The holding’s revenue
gained 12.3% m/m to USD 778 mln. Metinvest’s operating cash flow before working
capital changes dropped to negative USD 8 mln in December from negative USD 3
mln in November, whereas cash flow from operations (before profit tax and
interest) rose 20.9% m/m to USD 52 mln.

 

Metinvest also noted it impaired accounts receivable
totaling USD 36 mln in December.

 

The holding’s cash outflow from investment activities
jumped 83.1% m/m to USD 119 mln. Metinvest’s inflow from financing activities
amounted to USD 1 mln and its end-of-month cash balance decreased 22.4% m/m to
USD 274 mln. Its gross debt rose USD 61 mln m/m to USD 3,032 mln.

 

Metinvest’s metallurgical segment EBITDA was USD -85
mln in December, plunging further into the red from USD -36 mln in November,
while its mining segment EBITDA jumped 36.1% m/m to USD 49 mln.

 

In 2019, Metinvest’s revenue dropped 9.5% yoy to USD
10,757 mln, while its EBITDA plunged 51.7% to USD 1,213 mln.

 

Iron and steel product prices showed mixed m/m
dynamics in December, gaining 5% for pig iron and slabs, rising 7% for long
products, but losing 2% for flat products. Iron ore concentrate price slid 2%
m/m, while pellet price dropped 7% m/m.

 

Dmytro Khoroshun: Metinvest’s
December EBITDA, a negative USD 3 mln after an adjustment for the impairments
of receivables, was likely a low point in the recent plunge in the holding’s
profitability.

 

We continue to expect a rebound in Metinvest’s overall
profitability in January-February to at least USD 40-50 mln in EBITDA per
month. However, after rising since early November, Ukraine’s FOB export prices
for steel products started to correct in mid-January. Therefore, Metinvest’s
profitability might suffer again in the middle of 1H20.

 

The jump in investing activities cash outflow to USD
119 mln in December might be due to Metinvest issuing loans to its related
parties. As follows from Metinvest’s 2019 financial statements released also on
Mar. 4, in 2H19 Metinvest spent USD 64 mln of its cash on loans issued,
primarily to parties related to SCM, its controlling shareholder.

 

We note that a USD 1 mln net cash inflow from financing
activities and a USD 61 mln increase in gross debt are consistent with
Metinvest paying about USD 60 mln in dividends in December. In 2H19, Metinvest
spent USD 69 mln of its cash on dividends.