Metinvest sales director reviews 1H18 results, discusses plans

19 October 2018

Dmytro Nikolaenko, the sales director of Ukraine’s largest steelmaker Metinvest (METINV), reviewed the holding’s 1H18 results and discussed its near-term plans in an Oct. 17 interview with Metal Expert, an industry consultancy.

 

Nikolaenko noted that, in order to preserve its client base in Ukraine, Metinvest is reselling domestically the rebars produced by ArcelorMittal Kryviy Rih (AMKR, KSTL UK) after losing control over its producer of this product in the occupied part of Donbas, Yenakiyeve Steel (ENMZ UK), in March 2017.

 

Due to the EU’s protective measures against Ukraine’s hot-rolled flat steel, Metinvest’s sales of hot-rolled coils (HRC) to the EU dropped almost 50% yoy in 2017 to 0.6 mmt, and plunged to 40 kt in 1H18, Nikolaenko said, adding that in 1H18 Metinvest was able to redirect HRC sales to MENA and other regions. Metinvest’s sales strategy in Europe includes developing a network of steel service centers, preferably with a strategic partner, Nikolaenko noted, saying that developing client service and improving customer experience is a key 2019 strategic task for Metinvest’s sales force.

 

Metinvest is investing into its Ilyich Steel plant (MMKI UK), having completed in 1H18 the first stage of Mill 1700 reconstruction that has enabled it to increase HRC coil mass to 16.5 t from 9.5 t, Nikolaenko said. The launch of a brand-new continuous casting machine No. 4 at Ilyich Steel, which will increase the plant’s slab casting capacity to 4 mmt p.a. from 3.1 mmt p.a., is planned by the end of 2018, he said.

 

Nikolaenko also said that in September, Metinvest had finalized its acquisition of Unisteel, a 100 kt p.a. producer of zinc-coated hot-dip galvanized (HDG) coils located in Ukraine’s Kryviy Rih, which will allow to increase sales to Metinvest’s European customers.

 

In 1H18, Metinvest redirected its iron ore sales to the higher-margin European and Ukrainian markets from the more distant Asian markets, according to Nikolaenko.

 

Dmytro Khoroshun: Most of the takeaways from Nikolaenko’s interview are inferable from Metinvest’s MD&A of its 1H18 results. The holding is successfully managing the ambivalent market conditions and trade restrictions environment, investing in modernization and high-end product capacities.

 

What is missing from this picture is how Metinvest would approach its financing activities, particularly its dividends policy. Although we expect steel and iron ore prices to remain supportive for Metinvest in the short term, we emphasize that Metinvest’s current financial strength might induce the holding to pay a substantial amount of dividends, up to USD 600 mln, to support its owners. We think that Metinvest’s credit will benefit more from the holding focusing on modernization instead of rewarding its shareholders.

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