Metinvest steel output in September tops expectations, guidance

Attributable crude steel production at subsidiaries of Metinvest (METINV) was 855 kt in September, which is a 0.6% m/m increase, according to Concorde Capital’s analysis of separate companies’ results provided by Interfax-Ukraine. This includes Azovstal (AZST UK), Ilyich Steel (MMKI UK), Yenakiyeve Steel (ENMZ UK) and a 49.9% portion of Zaporizhstal’s result (accounted for as a JV). The average daily output in September was 3.9% higher m/m. In 9M16, the attributable steel production of Metinvest was 7.81 mmt (+4.7% yoy).

The two Mariupol-based mills of Metinvest produced 537 kt of crude steel in September (+4.3% m/m, +7.7% m/m on a daily average basis). This includes declining output by Ilyich Steel to 196 kt (-16% m/m, -13% m/m on daily average basis), which is mostly a result of overhaul work at one of its blast furnaces in late September.

Andriy Perederiy: The result came as a positive surprise, especially after the Oct. 10 comment by Metinvest’s CEO that output in September fell “by more than 10%” due to the overhaul of the railway connection with Mariupol. The good performance explains the abnormally high coupon payment by Metinvest for September.

That also may suggest that the overhaul factor (mentioned by CEO) will affect mostly the holding’s October results, which implies a risk that the holding’s coupon payable for October will be slightly less than a month before. Yet the statistics allow us to keep our bullish view on METINV Eurobonds and keep unchanged our 2016 forecast of its attributable steel production at 10.5 mmt (+9% yoy).