Metinvest reports negative EBITDA in November 2015
22 January 2016
Ukraine’s largest steelmaker and iron ore miner Metinvest (METINV) disclosed its operating and financial performance for October and November 2015 on Jan. 22. The company earned USD 2 mln in EBITDA in October (compared to a monthly average of USD 90 mln during the previous nine months of 2015). The USD 2 mln figure was already published in a trading update for 3Q15, but this time it was disclosed in detail: USD 16 mln earned by both of Metinvest’s divisions (consisting of USD 15 mln earned by mining) was mostly offset by corporate expenses and eliminations.
In November, Metinvest reported EBITDA of USD -4 mln as its metallurgical department generated losses of USD 2 mln and its mining division earned USD 2 mln in positive EBITDA.
The company paid USD 43 mln in interest during the two months and USD 6 mln in taxes. CapEx amounted to USD 50 mln in October-November.
A working capital release contributed to maintaining stable levels of cash: as of end-November, cash stood at USD 209 mln, compared to USD 198 mln as of end-September. As Metinvest has already disclosed, its cash position has declined to USD 140 mln as of Jan. 6, 2016.
Roman Topolyuk: The monthly disclosure of Metinvest’s financial performance supports management’s claim, alleged in its negotiations with its creditors, that the company lacks the capacity to pay interest in full on its debt currently.
We estimate that Metinvest’s EBITDA will have even worsened in December, compared to November, since the official hryvnia FX rate was almost unchanged at UAH/USD 23.5, but steel product prices lost another USD 10-20/t m/m in December.
The currently unfolding hryvnia devaluation (the official FX rate is at UAH/USD 24.5) will contribute to improving costs across the company’s product mix. An uptick in steel product prices by USD10/t in the second half of January, driven by Chinese and other global steelmakers trying to push prices upwards, will be a second key factor for Metinvest to return to positive EBITDA (but still not very large) in February.
