Metinvest invests in steelmaking, passes on dividends in 9M18

Metinvest (METINV), Ukraine’s largest steelmaker,
released its 3Q18 trading update with select financial results on Dec. 4. The
holding confirmed that its 9M18 EBITDA amounted to USD 2,015 mln (a 47% yoy
surge), the value inferable from its monthly reports. Revenue advanced 46% yoy
to USD 9,063 mln, and its EBITDA margin remained unchanged yoy at 22%. Its
metallurgical segment’s EBITDA tripled yoy to USD 1,126 mln, and EBITDA margin
rose by 8pp to 15%. Its mining segment’s EBITDA slid 13% yoy to USD 946 mln,
and EBITDA margin dropped 8pp to 33%.

CapEx more than doubled yoy to USD 620 mln. The share
of expansion CapEx amounted to 39% (11% a year ago), and the share of its
metallurgical segment CapEx amounted to 63% (43% a year ago).

Metinvest noted that the amount outstanding for the
July purchase of a 25% stake in Pokrovske Coal assets, which Metinvest reported was worth USD 190 mln, amounted
to USD 92 mln as of Sept. 30.

Dmytro Khoroshun: We
calculate that Metinvest’s monthly EBITDA amounted to USD 227 mln during 3Q18,
close to USD 229 mln during 2Q18. Unless China introduces strong measures to
stimulate credit expansion and infrastructure investment in the immediate
future, we see a substantial risk of Metinvest’s monthly EBITDA dropping
significantly below these recent levels during the next few quarters, into the
region of USD 150-200 mln. It is encouraging that during the recent period of
favorable markets, Metinvest apparently has not paid any substantial dividends
and focused on much-needed investments into its metallurgical segment assets.