Metinvest January EBITDA improves

Ukraine’s largest steelmaker Metinvest (METINV) reported its January EBITDA loss at USD 15 mln, according to the company’s release on March 31. This is an improvement compared to negative EBITDA of USD 33 mln in December 2015. Its metallurgical division generated zero EBITDA in January, as the positive result of Zaporizhstal of USD 3 mln (representing 49.9% of Zaporizhstal’s total EBITDA) offset losses at Metinvest’s steelmaking subsidiaries. Its mining division incurred losses of USD 7 mln.

Negative operating cash flow before working capital of USD 23 mln was offset via a working capital release of USD 58 mln. The holding’s CapEx was USD 15 mln in January (USD 32 mln in December) and cash outflow from financing activities was USD 49 mln. This led to total debt sliding to USD 2,909 mln as of end-January.

Roman Topolyuk: Despite the January loss, Metinvest reported improved EBITDA, which came in stronger than we expected. The main reason for the improvement was a 3% m/m hryvnia devaluation, as market prices were still bottoming in December before recovering in end-January. (The steelmaker usually closes contracts for steel sales roughly a month before production and shipment). We project the company will return to positive profitability in March and will report solid EBITDA in April, as steel prices grew 29-48%, or USD 71-123/t, since the beginning of the year. Iron ore prices advanced 19% since January to USD 53/t. We reiterate our bullish view on Metinvest’s notes.