Metinvest reports 15% EBITDA increase in 2013

Ukraine’s leading iron ore and steel holding, Metinvest (METINV), reported a 2% yoy increase in revenue to USD 12.81 bln in 2013, according to its annual report released on April 4. Its top line growth was fueled by a 5% yoy increase in revenue in its metallurgical division (to USD 9.73 bln). Its sales of steel products increased 3% yoy to 12.14 mmt, while its share of finished steel products in its product mix declined 3pp to 74%. Share of revenue generated on the local market declined 4pp yoy to 29%, while sales to CIS markets fell 3pp to 12% in 2013. Sales in the European, Middle East and Southeast Asian markets increased.

Its metallurgical division was also a core driver of EBITDA, which the company attributed to a decline in raw material costs and PCI introduction at Ilich Steel, which brought an economy of natural gas in crude steel production. The division’s EBITDA turned to positive USD 204 mln in 2013 (vs. USD -267 mln a year before) and contributed to Metinvest’s consolidated EBITDA of USD 2.29 bln (+15% yoy). The holding’s bottom line worsened 12% yoy to USD 392 mln, while the only factor that led to the decline was a 40% yoy increase in income tax to USD 373 mln.

The holding’s CapEx program was 2% yoy less at USD 747 bln, and the company is planning to retain it at about the same level in 2014. Operating cash flow (before working capital changes) increased 16% yoy to USD 2.19 bln and was broadly equal to the holding’s reported EBITDA.

Metinvest increase its total debt 1% yoy and 14% h/h to USD 4.31 bln as of end-2013. At the same time, its net debt declined 6% yoy. Total debt / EBITDA ratio was equal to 1.9x as of end-2013, falling from 2.1x a year ago and moving further from the 3.0x Eurobond covenant.

At its conference call on April 4, Metinvest top management reported that the holding’s 1Q14 was slightly better yoy in terms of P&L, and it expects the full year to be broadly the same as 2013. Logistics through its Crimean ports haven’t been disrupted and management said it has experienced little discomfort from the ongoing conflict between Ukraine and Russia.

At the same time, Metinvest sales to the Russian Federation reportedly declined last month, which the management attributed to solely market reasons (as soon as the Russian currency devalued, sales to other markets became more efficient for Metinvest). Management also said the company will benefit from the devaluation of the local currency, with possible effect from each 10% of devaluation being an increase in EBITDA by USD 250-300 mln.