Metinvest EBITDA surges 21% yoy in 9M16

Ukraine’s largest steelmaker Metinvest (METINV) reported EBITDA of USD 128 mln in September (-3.8% m/m), according to its monthly results published on Nov. 28. The monthly results imply that Metinvest’s EBITDA was USD 987 mln in 9M16 (+21% yoy) and USD 408 mln in 3Q16 (-11% qoq).

Net operating cash flow came in at USD 27 mln in September, after Metinvest recorded USD 57 mln in working capital investments during the month. The holding’s CapEx was 26 mln in September (+13% m/m). Cash outflow from financial activities declined 50% m/m to USD 26 mln. Its cash balance decreased 9% m/m to USD 239 mln, exceeding the USD 180 mln threshold that enabled it to pay out excess cash interest for the month.

Andriy Perederiy: With 9M16 preliminary results in hand, we are upgrading our 2016 Metinvest’s EBITDA forecast to USD 1.35 bln. As the holding significantly improved its ability to generate cash flow (which is mostly a result of beneficial steel and iron ore prices), it returned to its tactics of accumulating working capital that it employed in April-July.

This time, we believe Metinvest was accumulating working capital heavily to avoid excess interest and principal payments to debt holders. Based on the standstill agreement, such payments depend on Metinvest’s cash balance (recall, the holding already paid 98% of and 106% of interest accrued on Eurobonds in September and October, respectively). We continue to expect the holding will be able to agree to a long-term debt restructuring by end-December, and hope that it will announce the latest restructuring terms in the coming days. We are keeping our positive view on Metinvest Eurobonds.