Metinvest reports strong 1H10 financials

Yesterday Metinvest reported an overview of its 1H10 financials. Mykyta Mykhaylychenko: In line with our expectations, the recovery in global economic activity led to strong performance: total revenues were up 49% y-o-y to USD 4.2 bln, led by more than double increase of sales from its coke & coal and iron ore segments (driven, to a large extent, by price increases), while steel segment revenues were up 19% y-o-y. Metinvest’s EBITDA more than doubled over 1H10 and totaled USD 1.2 bln, implying a 28.5% EBITDA margin. Total debt reached USD 2.7 bln (incl. Seller’s Notes, USD 500 mln, 5Y of Eurobonds, and USD 700 mln, 3Y of syndicated facility), while its cash balance stood at USD 0.7 bln as of end-1H10. As we anticipate Metinvest’s EBITDA to reach USD 2.3 bln (27% EBITDA margin) in 2010 and total debt to stay within USD 3 bln, its Gross debt/EBITDA should stand at about 1.3x as of end-2010F. Although we see limited price upside potential for Metinvest’15 Eurobonds, traded now at 8.5% YTM (190 bps above Ukraine’s sovereign curve), we deem these notes as a good investment opportunity with attractive risk/return characteristics.