Metinvest to boost CapEx to USD 1.5 bln per year

Metinvest (METINV), Ukraine’s largest steelmaker,
plans to boost its annual CapEx to USD 1.4-1.5 bln in the next several years, according
to CEO Yuriy Ryzhenkov who spoke on a 1H21 results disclosure call with
investors on Sept. 1.

 

Such an amount of CapEx will be 70-80% higher than USD 800-850 mln expected for 2021.

 

Metinvest expects its maintenance CapEx to amount to
USD 750-850 mln per year, or about 30-50% more than what could be expected for
2021 according to Concorde Capital calculation. The increase in maintenance
CapEx will be in large part due to the recent acquisition of the Pokrovske coal business
and Dniprovskyy Steel assets.

 

The Dniprovskyy Steel assets might require about USD
100 mln per year in total investments, including USD 50-60 mln per year in
maintenance CapEx, Ryzhenkov said.

 

Metinvest’s planned strategic CapEx includes a USD 1 bln investment into a
high-value-added cold-rolling steel facility at Ilyich Steel.

 

Following the recent acquisitions, the company’s
M&A pipeline is empty at least for the next few quarters.

 

Metinvest currently does not plan further buybacks of
its notes (it repaid USD 1.0 bln of debt in 1H21 and its total debt is
currently about USD 2.2 bln). However, the company plans eventually to replace
a part of its Eurobonds outstanding with financing related to CapEx projects
and guaranteed by export credit agencies, according to the CEO.

 

The company plans to maintain a minimum cash balance
of USD 400-500 mln under the current market conditions. Metinvest intends to
pay in dividends only from whatever is left over after its spending on debt
service, CapEx and working capital needs while maintaining its debt-related
covenants, Ryzhenkov said.

 

Dmytro Khoroshun: Metinvest
is well-prepared for the next stage of its development as a result of its 1H21
deleveraging.

 

Metinvest might pay at least up to USD 600 mln of
dividends during the next few quarters before focusing on CapEx, we think.

 

We maintain our neutral view on METINV bonds.