Metinvest: single-digit output growth in 2011

Metinvest (METINV) released its 2011 production update yesterday: steel production increased 3.9% yoy to 14.4 mmt in 2011 (-6.7% yoy in 4Q11), coking coal mining output rose by 12.3% yoy to 11.3 mmt, and iron ore production was flat yoy at 35.7 in terms of iron ore concentrate (+0.6% yoy in 4Q11).

Roman Topolyuk: Metinvest’s mostly flat operating performance in 2011 was broadly expected by the market. We estimate the holding’s 2011E Net Debt/EBITDA at 0.7-0.8x, way below its bond covenant of 3.0x. A decrease in steel production in 4Q11 was in line with expectations due to market weakening, and we believe will reverse in 2Q12. As we expect Metinvest’s iron ore output, its main contributor to EBITDA, to remain stable this year, its key financial indicators should remain largely at the same levels as in 2011.