Metinvest steel production declines 42% in 3Q14

Ukraine’s largest vertically integrated steel and mining holding Metinvest (METINV) reported its 3Q14 operating results on Oct.30. Steel production fell 42% qoq to 1.7 mmt due to decreased output at Ilyich Steel and Azovstal, and a temporary suspension of operations at Yenakiyeve Steel. It has impacted output of steel products: semi-products production decreased 48% qoq to 317 kt in 3Q14, and finished products output fell 35% qoq to 1.4 mmt.



Iron ore concentrate total output declined 8% qoq to 8.4 mmt, while production of merchant concentrate increased 23% qoq, amid a 10% decline output of pellets sold to third parties to 1.7 mmt. That was a result of Metinvest redirecting iron ore concentrate from in-house and domestic sales to export deliveries, but not all volumes of pellets, previously sold in Ukraine internally, have found clients abroad. Coking coal concentrate production for third parties fell 15% qoq to 271 kt in 3Q14, following operating and logistics constraints at Ukrainian subsidiary Krasnodon Coal.



Roman Topolyuk: Metinvest’s 3Q14 operating results were hurt by the warfare in the Donbas region. We expect the company’s 4Q14 performance will show some improvement owing to the restart of Yenakiyeve in October and some increase in the capacity load of Ilyich Steel and Azovstal. However, both steelmakers will still be facing logistic constraints, limiting their ability to reach full capacity.



Metinvest’s redirection of iron ore to export markets hasn’t compensated for the loss of its domestic market, so the company needs to restore its in-house supplies and sales of iron ore products to IUD and Donetskstal in order to offset falling global iron ore prices. We reiterate our EBITDA forecast at USD 2 bln in 2014, corresponding to a total debt-to-EBITDA ratio of 1.7x vs. a covenant of 3x.

Источник: Конкорд Капитал