Metinvest to receive USD 275 mln in dividends from JV

Southern Iron Ore, a joint venture of Ukraine’s
largest steel producer Metinvest (METINV), plans to declare UAH 19.7 bln (USD
705 mln) in dividends, according to the agenda of its EGM to be held on April
21. About USD 671 mln, or 95% of the total amount to be declared is part of its
2020 net profit, the company said in the agenda published on Apr. 5, with the
remainder being part of net profit for 2017-2019.

 

The shareholders attending the EGM are asked to
delegate to the company’s supervisory board the rights to determine the record
date and the time period for the dividend payment.

 

Other items of the agenda include approving Southern
Iron Ore’s 2020 annual accounts and report.

 

Recall, on Feb. 17 Southern Iron Ore announced that
another EGM, to be held on March 5, might decide on declaring USD 302 mln in dividends,
as all being part of its 2019 net profit.

 

Dmytro Khoroshun: Metinvest
owns 45.9% of Southern Iron Ore and should receive USD 275 mln after tax (15%)
in dividends as a result of the proposed EGM decision.

 

However, this cash inflow to Metinvest from Southern
Iron Ore might also be associated (take place simultaneously) with a cash
outflow from Metinvest to Southern Iron Ore related to working capital.

 

Namely, trade accounts payable by Metinvest to its JVs
(including Southern Iron Ore) jumped to USD 1.02 bln at 2020-end from USD 503
mln at 2019-end, according to its 2020 financial statements. In January,
Metinvest’s cash inflow due to increases in accounts payable amounted to USD
219 mln.

 

Metinvest’s trade accounts payable specifically to
Southern Iron Ore were USD 390 mln at 1H20-end, up from USD 219 mln at
2019-end, according to Metinvest’s September 2020 prospectus.

 

To summarize, it is possible that Southern Iron Ore
has, for the last year or so, been using its cash to finance its owners,
including Metinvest, via working capital, and will now recall part of this
financing in order to pay dividends.

 

We maintain our neutral view on METINV bonds.