Two Metinvest steelmakers at risk after bridge blown up in Mariupol

The sustainability of operations at two steelmaking subsidiaries of top Ukrainian steel and iron ore producer Metinvest (METINV) – Ilyich Steel and Azovstal in the city of Mariupol – is at risk after a group of saboteurs blew up a railroad bridge connecting both enterprises to the city’s port and railway station on Dec. 23. The city of Mariupol is located in the Donetsk region of Ukraine, 50 km away from the Russian border and dozen of kilometers from the territory occupied by Russian-terrorist forces.



Ilyich Steel and Azovstal transported about 30% of their raw material supplies and 60% of finished product shipments over the damaged bridge, according to a Metinvest release from Dec. 23. State railway operator Ukrzaliznytsia has limited cargo and passenger transportation in the region due to the accident. Metinvest stated that it is trying to organize alternative routes and hasn’t disclosed when the railway connection can be restored.



Roman Topolyuk: The sabotage will have minimal impact on Meinvest’s production and sales volumes in 2014 so we are keeping our estimate of the company’s EBITDA of USD 2.2 bln in 2014 (almost flat yoy) unchanged. However, the outlook for 2015 has become grimmer, since even before the incident, Ilyich Steel and Azovstal had to operate at just 60-80% of potential capacity load because of logistics constraints caused by the destruction of other railway infrastructure in Donbas. The bridge’s reconstruction could take up to several quarters, depending on the severity of the accident.



Unless the company finds some quick-fix solution, our current forecast of Metinvest’s 2015 EBITDA of USD 1.5 bln (-32% yoy) may be challenged, and the company’s liquidity gap next year can widen. We remain negative on METINV bonds as it has become clear that the company’s assets are being specifically targeted by pro-Russian separatists, aiming to undermine industrial potential of Ukraine and weaken its macroeconomic stance.

Источник: Конкорд Капитал